Income from interest

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Updated: 1/10/2008 8:29 am
You have to pay taxes on just about all the income you receive from interest, regardless of the source. This includes interest on savings accounts, notes, loans, and bonds, except for state and municipal bonds. Interest on U.S. Savings bonds may be deferred until the bonds mature, or the accrued interest may be reported annually. If you have a child under the age of 18, that had more than $1,500 of investment income and either parent was alive at the end of the year, you'll need to report it on Form 8615 (86-15). Banks and other interest payers report their payments to the IRS on Form 1099-INT (10-99-I-N-T), and you receive a copy. If you receive interest, dividends, or other investment income as a beneficiary of an estate or trust, you will need to report it on Schedule K-1, Form 1041 (10-41). The IRS will check its copies against the interest income reported on your return. If there's a discrepancy, you'll receive a computerized statement asking for an explanation and a bill for taxes due. These notes are meant to be a general guide to federal income taxes. If you need specific advice, please consult a tax advisor or call the toll-free number for Federal Tax Information and Assistance at 1-800-829-1040.

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