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How "exact" do I have to be?

I have several 1099INT with treasury bonds, corporate bonds and municiple bonds all on the same statement. The three have different federal and state treatments. I also have accrued interest that has to be subtacted from the interest amounts.

TaxCut assumes the accrued interest is proportional to the interest amounts, but that isn't necessarily true. For instance, one account is mainly municiple bonds, but the accrued interest is mainly corporate bond. So it reduces the corporate bond interest less than it should.

TaxCut's method might result in an error of 5% of the interest. It is random and could help or hurt me. I tried to enter a "1099INT" with the accrued interest as negative values to do it accurately, but TaxCut won't take it.

Can I just go with TaxCut's method and figure it is close enough? I don't like that, but I don't see any alternative. It is not big dollars; maybe $50 of tax. I realize the IRS doesn't even get the accrued interest information, but still...

Reply to
Tom
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Input them as separate 1099's.

Reply to
Phil Marti

Okay, I can do that. At this time I have 7 1099INTs from Fidelity accounts and call them FID/(last three digits of the account number), or FID/060. Is it reasonable to add /(C, T, M), or FID/060/C if they are corporate, treasuries, or municiple bonds? Will the IRS be able to figure the system out, or should I explain somehow? Or is there a better labeling system?

Reply to
Tom

I went to try that and found it didn't work on the first one. I had no corporate bond interest in 2008, but I had corporate accrued interest. Must have bought it at the end of the year before it declared an interest payment, but with accrued interest.

So, I would have to enter a negative number, but Taxcut won't let me enter an INT with a negative number.

Reply to
Tom

In this situation you do not put the negative interest on your return until 2009.

It works as follows:

When you buy the bond, the interest you pay the seller is added to your basis. Then, when you receive the next coupon payment (or you sell the bond, if that happens first), it is subtracted back off your basis and you recognize it as negative interest income.

Steve

Reply to
Steve Pope

Incorporate the accrued interest into your 2009 return.

Reply to
removeps-groups

Your labeling system is fine. Just be sure of one thing: that the sum of the interest (Box 1) matches what's on the 1099-INT.

Reply to
removeps-groups

I wrote,

For the sake of completion here is the relevant description from Pub 550, Page 11:

If you buy a bond between interest payment dates, part of the purchase price represents interest accrued before the date of purchase. When that interest is paid to you, treat it as a return of your capital investment, rather than interest income, by reducing your basis in the bond.

There is a further discussion on Page 19, most of the way down the first column on that page.

The wording is a little tricky so I could be misinterpreting this, but that is how I read it.

Steve (not a tax pro etc.)

Reply to
Steve Pope

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