Reporting of Bond premium on noncovered security

My 1099-int lists a bond premium for a covered security in box 11, and I can match it with the security in the details that follow.
Within these pages of details they also list a bond premium for a noncovered security. Where in Turbo Tax, either in the interview or the forms mode, with which I'm comfortable, can this be entered? Am I correct that this is an offset to the interest I receive from this bond and that finding a spot for it would benefit me, however little?
There was an suggestion on the TTAX forum that this be entered deep down in the Schedule A for Other deductions, as an investment expense. This doesn't seem right.
jo
Reply to
jo
The adjustment for Bond Interest has been in TTAX and HRBLOCH for as long as i have been using them. And for the last several years I have been computing the amortization and reporting it there. If I add the amortization for the non covered bonds to the amount reported for covered bonds I am concerned that the IRS will raise a flag. I have yet to decide what to do. Since my bonds are tax free the consequences of not declaring the reduction in income are minimum.
JB
Reply to
John Beurket
John B. says "Since my bonds are tax free the consequences of not declaring the reduction in income are minimum."
I'm pretty sure that IRS rules *prohibit* the "reduction" that he seems to be referring to. It's not a choice for tax-exempt bonds.
The rules are all there in the IRS publication, but I can't remember the pub number.
Reply to
lotax
John B. says "Since my bonds are tax free the consequences of not declaring the reduction in income are minimum."
I'm pretty sure that IRS rules *prohibit* the "reduction" that he seems to be referring to. It's not a choice for tax-exempt bonds.
The rules are all there in the IRS publication, but I can't remember the pub number.
Reply to
lotax
Tax free income IS reduced over the life of the bond to compensate for loss of capital which cannot be declared for tax free bonds which is what is prohibited, not the reduction of declared income.
Reply to
John Beurket
JB, I'm sure we're saying the same thing in different words.
Taxable income is never to be reduced by the amortization of a premium paid for exempt bonds, even though the premium is required to be amortized over the life of the exempt bond.
Reply to
lotax
You didn't indicate, but I'm assuming it's all taxable interest.
In TurboTax's "Interest Income Summary" sheet, click on "Edit" for the payer.
This displays a page to enter the 1099-INT amounts.
Then click "Continue" to get to the next page. It has four check boxes.
Check "I need to adjust the amount" and "Continue"
In the next page, - enter the NON-covered premium amount as a positive number, and - click "I amortized a premium," and - "Continue"
In Schedule B, you should see under "ABP Adjustment" the negative of the sum of - Form 1099-INT box 11, and - the NON-covered adjustment you entered.
As you mention, this will benefit you a little this year. However, the bonds' basis is reduced correspondingly, so you won't report a loss at maturity. My attitude is a benefit now is better than one later. Also, reducing ordinary income is more helpful than reducing capital gains.
Please refer to "Choosing to Amortize" in IRS Publication 550 [2014], page 35 for some reporting details.
Hope this helps.
[Disclaimer: I'm not a tax professional; just an ordinary TurboTax user.]
Reply to
zvkmpw
Thank you for you input, but I was looking for some official statement on the 1099-INT form. It was not mentioned in PUB 550. The bonds happen to be Tax Free, for which amortization is required.
JB
Reply to
John Beurket
For tax-exempt bonds, the amortized-premium adjustment ought to enter into calculation of Form 1040 line 8b, not into Schedule B. As "lotax" wrote, "Taxable income is never to be reduced by the amortization of a premium paid for exempt bonds"
For most taxpayers, line 8b has no impact on the total tax. For some, it could impact how much of one's Social Security benefits are taxable. It may also impact the premiums for Medicare Part B and Part D.
[Disclaimer: I'm not a tax professional.]
Reply to
zvkmpw
For tax-exempt bonds, the amortized-premium adjustment ought to enter into calculation of Form 1040 line 8b, not into Schedule B. As "lotax" wrote, "Taxable income is never to be reduced by the amortization of a premium paid for exempt bonds"
Reply to
zvkmpw

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