For the first time I have some tax free interest in 2011. I see that there is a place to enter it on IRS Form 1040. If I do not report it will I be penalized? Is there some future advantage to reporting it now (it is in an account with Merrill Lynch and I did not withdraw it).
Tax exempt interetmight affect other tax andnontax items and IRS does ask you to place T/E interest on Line 8b.
Items affected include EIC, social security taxation, Medicare B surcharges, sales tax deduction, and others.
I'm really having trouble understanding what's behind this question. You sign a return under penalty of perjury, saying that it's complete to the best of your knowledge. Doing that while knowing that you've left out required information appeals to you because...? OTOH, if you inadvertently omitted it on a return you've already filed and are wondering whether you should amend the return, my question would be whether it would affect anything else on the return.
Phil Marti VITA/TCE Volunteer Clarksburg, MD
Keep in mind that Merrill Lynch has reported that interest to the IRS so the IRS knows about it.
Ira Smilovitz Leonia, NJ
Plus state income tax return in some cases.
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