Form 1099-INT, Explained: What Every Box Reports and the $10 Threshold That Decides Whether You Get One

Your bank already told the IRS how much interest it paid you this year — the copy of Form 1099-INT sitting in your mailbox (or your online document vault) is just the courtesy copy. When the number on your tax return doesn't match the number the IRS computer already has, you get a CP2000 notice proposing extra tax plus interest, and the most common cause is a small 1099-INT nobody bothered to open. Twelve dollars of savings-account interest can generate a four-page letter.

This guide walks through every box on Form 1099-INT in plain language: which interest counts as taxable, which penalty is secretly a deduction, why Treasury interest gets special treatment on your state return, what backup withholding means when you see it, and the filing thresholds that decide whether a payer must send you the form at all.

Who Gets a 1099-INT: The $10 Rule and Its Exceptions​

A payer must send you Form 1099-INT when any of these apply:

• $10 or more of interest reportable in Box 1, Box 3, or Box 8. This is the headline threshold: ten dollars of bank interest, Treasury interest, or tax-exempt interest triggers the form.
• $600 or more of interest paid in the course of a trade or business that doesn't fit the usual categories — for example, interest on delayed insurance death benefits, interest received with a legal damages award, or interest on a state or federal tax refund.
• Any backup withholding at all, even on a few cents of interest. If the payer withheld federal income tax under the backup withholding rules and didn't refund it, it must file the form regardless of the amount.
• Any foreign tax paid on the interest, again regardless of amount.

Corporations, tax-exempt organizations, IRAs and HSAs, brokers, and government agencies are generally exempt recipients — payers don't file 1099-INTs for interest paid to them.

One point deserves emphasis because it surprises people every filing season: no form does not mean no tax. Interest under $10 is still taxable income. If your savings account earned $8 and the bank sent nothing, you still report the $8. The $10 threshold governs the payer's paperwork, not your obligation.

Box 1: Interest Income​

Box 1 is the workhorse of the form. It holds taxable interest not reported in Box 3, including:

• Interest on bank deposits, savings accounts, money market accounts, and CDs
• Interest on corporate bonds, debentures, and notes
• Accumulated dividends paid by a life insurance company
• Interest from which federal income tax or foreign tax was withheld

For most recipients, Box 1 is the only filled box, and it flows to your return as ordinary interest income — on Schedule B if you file one, and on Form 1040, line 2b. Interest is taxed as ordinary income, not at the lower capital-gain rates that apply to qualified dividends and long-term gains.

Two things that look like they belong here don't: interest on U.S. Treasury obligations goes in Box 3, and dividends from money market funds (as opposed to bank money market accounts) go on Form 1099-DIV, not Form 1099-INT at all.

Box 2: Early Withdrawal Penalty — a Deduction in Disguise​

Broke a CD before maturity and forfeited some interest (or principal)? That forfeiture lands in Box 2, and it is one of the friendliest boxes on the form: it's deductible from gross income. You claim it as an above-the-line adjustment on Schedule 1, which means it reduces your adjusted gross income whether or not you itemize.

The trap is double-counting the benefit. The instructions are explicit that the payer does not reduce Box 1 by the forfeiture — Box 1 shows the full interest credited, and Box 2 shows the penalty separately. Report both numbers where they belong and let the Schedule 1 deduction do its work; don't subtract the penalty from Box 1 yourself.

Box 3: Treasury and Savings Bond Interest — Federal Yes, State No​

Box 3 holds interest on U.S. Savings Bonds, Treasury bills, Treasury notes, and Treasury bonds. Federally, it's ordinary taxable interest just like Box 1. But it gets its own box for one reason: interest on U.S. obligations is exempt from state and local income tax.

That exemption is worth real money in high-tax states, and the single most common Box 3 mistake is paying state tax on it anyway — usually because tax software was never told the interest came from Treasuries, or because the amount got lumped in with Box 1. When you enter your 1099-INT, make sure Box 3 stays in Box 3 so your state return can subtract it.

A practical wrinkle: TreasuryDirect does not mail 1099-INT forms. If you hold savings bonds or T-bills there, log in each January and download the form yourself. Forgotten TreasuryDirect interest is one of the most common sources of unreported interest income — and of those CP2000 letters.

Box 4: Federal Income Tax Withheld — Backup Withholding at 24%​

An amount in Box 4 means the payer withheld federal income tax from your interest under the backup withholding rules, at a flat 24%. This isn't an extra tax — it's withholding, credited against your total tax when you file, exactly like withholding from wages.

Backup withholding kicks in when something is wrong with your taxpayer identification information: you never gave the payer a Form W-9, the name and TIN combination doesn't match IRS records, or the IRS specifically notified the payer to withhold because you underreported interest in the past. If you see Box 4 filled in unexpectedly, the fix is usually a fresh Form W-9 with the correct name and Social Security number — then confirm the payer stops withholding going forward.

Remember the filing consequence from the threshold section: any backup withholding means a 1099-INT must be filed even if the interest itself is pennies. A $9 interest payment with $2 withheld still produces a form, with the interest in Box 1 and the withholding in Box 4.

Boxes 5 Through 7: The Boxes You Will Probably Never See​

• Box 5, Investment Expenses, applies only to single-class REMICs (real estate mortgage investment conduits) — esoteric mortgage-backed-security structures. If you don't know what a REMIC is, this box will be blank.
• Box 6, Foreign Tax Paid, shows foreign tax withheld on the interest. Like backup withholding, any amount here forces the form to be filed. You can generally claim it as a foreign tax credit or an itemized deduction.
• Box 7 names the foreign country or U.S. possession where that tax was paid.

Box 8: Tax-Exempt Interest — Exempt From Tax, Not From Reporting​

Box 8 reports tax-exempt interest of $10 or more, typically from municipal bonds issued by states, cities, and other public entities. It's exempt from federal income tax, but the IRS still wants to see it: it goes on Form 1040, line 2a, right above the taxable interest line.

Two mistakes recur here. The first is reporting Box 8 as taxable income on line 2b — check that your software puts it on 2a. The second is assuming "tax-exempt" means exempt everywhere: interest on another state's municipal bonds is usually taxable in your state. Only your own state's munis (and U.S. territories, in most states) typically escape both levels of tax.

Box 9: Specified Private Activity Bond Interest — the AMT Tripwire​

Box 9 is a subset of Box 8: interest from specified private activity bonds — municipal bonds whose proceeds fund private projects like airports, stadiums, or private-purpose housing, generally issued after August 7, 1986. The amount appears in both Box 8 and Box 9.

Why the double reporting? Because while this interest is exempt from regular federal tax, it's a preference item for the alternative minimum tax. If you're subject to AMT, the Box 9 amount gets added back on Form 6251. For most taxpayers the box is informational only, but if you hold muni-bond funds and have AMT exposure, this is the number your tax preparer will ask about.

Boxes 10 Through 13: Market Discount and Bond Premium​

These boxes matter if you bought bonds on the secondary market rather than at issue:

• Box 10, Market Discount, shows discount that accrued during the year on a covered bond bought below face value, when you've elected to accrue it annually under section 1278(b).
• Box 11, Bond Premium, shows premium amortization on a taxable bond bought above face value — the portion of each interest payment that's really a return of your own premium, which reduces the taxable interest.
• Box 12 is the same concept for U.S. Treasury obligations, and Box 13 for tax-exempt bonds.

Brokers may report these either net (interest already reduced, premium box blank) or gross (full interest plus the premium amount). Either presentation is correct, but you need to know which one you're looking at before you copy numbers onto your return — net reporting with a manual subtraction is how premium gets deducted twice.

Box 14 and Boxes 15–17: CUSIP and State Information​

• Box 14 carries the CUSIP number identifying the tax-exempt or tax-credit bond behind Box 8 interest, or "various" when the interest aggregates multiple bonds.
• Boxes 15–17 hold state tax information — the state abbreviation, the payer's state ID number, and any state tax withheld — used by payers in the Combined Federal/State Filing Program and by recipients filing state returns.

Where the Numbers Land on Your Return​

The reporting chain is short but has one branch worth memorizing:

• Form 1040, line 2a: tax-exempt interest (Box 8).
• Form 1040, line 2b: taxable interest (Box 1 plus Box 3).
• Schedule B: required when your combined taxable interest and ordinary dividends exceed $1,500 — it lists each payer separately, then totals to line 2b.
• Schedule 1: the Box 2 early withdrawal penalty, as an above-the-line deduction.
• Form 6251: the Box 9 amount, if AMT applies.

If your total interest is $1,500 or less and nothing else forces Schedule B, you can report the totals directly on Form 1040.

If You're the Payer: Deadlines and Penalties​

Small businesses usually encounter 1099-INT from the payer side when they pay interest in the course of business — on a private loan, a late-payment settlement, or seller financing. The calendar:

• Furnish Copy B to the recipient by January 31 (shifting to the next business day when the date falls on a weekend or holiday).
• File with the IRS by February 28 on paper, or March 31 electronically. E-filing is mandatory at 10 or more returns, counting nearly all information-return types together.

Miss these and the penalties stack per return — starting around $60 for corrections within 30 days, rising to roughly $310 after August 1, and $660 per form for intentional disregard. The cheapest compliance step is collecting a Form W-9 from every interest recipient before you pay them: with a valid TIN on file, backup withholding never starts and your filing data is already correct.

Tracking Interest in Your Books​

Interest dribbles in all year — monthly savings credits, quarterly bond coupons, an annual CD payout — and reconstructing it from bank statements the following April is how small amounts go missing. The fix is recording each receipt as investment income when it arrives, with Treasury interest in its own account so your state-tax subtraction practically prepares itself:

2026-01-31 * "First Bank" "January savings interest"
  Assets:Bank:Savings            42.18 USD
  Income:Interest:Bank-Savings  -42.18 USD
 
2026-02-15 * "TreasuryDirect" "4-week T-bill interest"
  Assets:TreasuryDirect:Cash   96.00 USD
  Income:Interest:Treasury    -96.00 USD
 
2026-03-10 * "First Bank" "CD early withdrawal penalty"
  Expenses:Bank:Early-Withdrawal-Penalty   85.00 USD
  Assets:Bank:CD                          -85.00 USD

At year end, the balance of Income:Interest:* should reconcile to your 1099-INTs (Box 1 plus Box 3), the Treasury subaccount tells you exactly what to subtract on your state return, and the penalty expense ties to Box 2. If you keep books in plain text, the Beancount documentation covers income and expense account structure in detail, and Fava turns these postings into the income breakdown your preparer wants to see.

The Mistakes That Generate Letters​

Before you file, run through this short list — each item is a CP2000 in waiting:

1. Forgetting TreasuryDirect. No mailed form means no reminder. Download it in January.
2. Reporting Box 8 on line 2b. Tax-exempt interest belongs on line 2a.
3. Paying state tax on Box 3. Treasury interest is exempt from state and local tax — verify the subtraction on your state return.
4. Subtracting Box 2 from Box 1. Report both; the deduction happens on Schedule 1.
5. Ignoring interest under $10. No form was required, but the income is still taxable.
6. Deducting bond premium twice. Check whether your broker reported interest net or gross before touching Boxes 11–13.

Gather every 1099-INT — bank portals, brokerage composite statements, TreasuryDirect — match each Box 1 and Box 3 total against the interest accounts in your books, and confirm the tax-exempt and withholding lines landed on the right lines of the return. Ten quiet minutes with the forms now beats a four-page notice in August.