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This past year I earned interest in a CD and a savings account from a Credit Union. The amount of interest from savings account was less than $1. The amount of interest earned in the CD's was over $10. The Cd's are scheduled to mature this year.

I have not received a 1099 INT from them. When I talk to the customer service representative they said yes I should get one but have yet to mail me a 1099INT which now is well past the January 31, 2007 mailing date. I also have asked by a private message and not received a answer in 5 days.


When I look at their web page inside it shows no tax documents at all.

I'm not sure what to do. Please advise.


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This past year I earned interest in a CD and a savings account from a Credit Union. The amount of interest from savings account was less than $1.

Since you know the amount of interest earned, enter it on line 8a of your 1040 (or Schedule B, if required) and be done with it. You don't need a 1099.

Phil
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>> Since you know the amount of interest earned, enter it on line 8a of your 1040 (or Schedule B, if required) and be done with it. You don't need a 1099. <<

This is true, but shouldn't they have received a 1099 for the interest on the CD, seeing it was over $10?

#29
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This is true, but shouldn't they have received a 1099 for the interest on the CD, seeing it was over $10?

IIRC the interest earned was less than $10, but from the taxpayer's perspective it's irrelevant. In all cases except where withholding is involved, the taxpayer doesn't need any 1099 to prepare and file his return. In all cases the taxpayer should have information needed to "create" a 1099. Otherwise how does she know the 1099 is right?

Phil
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>> Since you know the amount of interest earned, enter it on line 8a of your 1040 (or Schedule B, if required) and be done with it. You don't need a 1099. <<

This is true, but shouldn't they have received a 1099 for the interest on the CD, seeing it was over $10?


Not necessarily. The missing piece of information is the term of the CD. Interest on short-term CDs (I think 9 months or less, but I haven't looked it up) is only reportable at maturity. Interest on longer-term CDs is reportable annually.

Another possible explanation is that many 1099-INTs will be issued late this year. Many payers have received 30 day extensions due to changes in the law which now require them to report tax-exempt interest on the 1099-DIV. All the computer systems have to be updated and tested.

Ira
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Ira asked this in his post, but in case you miss it, I'm emailing this to you... what was the term of the CD? i.e. how long was the CD for? Please post the answer on the board. Thanks.

- Fred
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... what was the term of the CD? i.e. how long was the CD


CD1 15month 5.25% Div earned 59.25
CD2 21month 5.75% Div earned 10.84
CD3 14month 6.0% Div earned 9.02
CD4 14month 6.0% Div earned 6.91
CD5 14month 6.0% Div earned 11.56
CD6 14month 6.0% Div earned 13.17
CD7 6month 4.95% Div earned 3.60
CD8 6month 4.95% Div earned 3.63
CD9 6month 5.12% Div earned 0.00


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You listed the dividends (the unfortunate credit union term for interest) earned on the CDs. But that is not important. For tax purposes, you need to know the dividends paid.

The CDs with terms over 1 year probably pay the interest either once a year, or quarterly. The shorter ones may pay the interest only at maturity.

You'll need to dig through your records to see what interest payments were actually made.

--Peter
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You'll need to dig through your records to see what interest payments were actually made.

These amounts were actually paid to each CD.

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These amounts were actually paid to each CD.


Okay, to rephrase Peter's advice differently--

CDs #1-6 span more than a year's timeframe, therefore you need to identify how much of the interest for each of the first 6 CD's apply to Tax year 2006. Depending on when the CD's were acquired, the first six CDs could each potentially have interest that applies in three different tax years.


Hohum


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You listed the dividends (the unfortunate credit union term for interest) earned on the CDs. But that is not important. For tax purposes, you need to know the dividends paid.

The CDs with terms over 1 year probably pay the interest either once a year, or quarterly. The shorter ones may pay the interest only at maturity.

You'll need to dig through your records to see what interest payments were actually made.


It really doesn't matter how often the CD pays interest. I looked up the rules after my earlier post. CDs with terms under one year are generally taxed at maturity (though you can opt to report on an as earned within tax year basis). CDs with terms of more than one year are treated like OID. Interest is reported annually whether actually received or not.

Ira

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These amounts were actually paid to each CD.

Let me rephrase.

What interest could you take - without any premature withdrawal penalties - and use to go buy a cheeseburger?

I ask because CDs with an original term of less than a year very frequently pay the interest only at maturity. Longer term CDs can pay interest monthly, quarterly, or annually.

--Peter
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What interest could you take - without any premature withdrawal penalties - and use to go buy a cheeseburger?

It is my understanding I can't take $.01 cent out to buy a cheeseburger.

I just redug thru the records and found that they pay each month they credit the interest to the account and add it to the balance.

Sorry guys I'm still confused.
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What interest could you take - without any premature withdrawal penalties - and use to go buy a cheeseburger?

Certainly, when the CD matures you can take the money out without premature withdrawal penalties. So that gives us the latest date that is possible for paying taxes on the interest income.

It is my understanding I can't take $.01 cent out to buy a cheeseburger.

Then you haven't yet received the interest for tax purposes. Only when it is available to be withdrawn is it actually paid to you. And that is when it becomes taxable.

I just redug thru the records and found that they pay each month they credit the interest to the account and add it to the balance.

Adding the interest to the balance is not the same as actually paying the interest to you. Ask them if you have the option of receiving a check for the interest. On the date you have that option, you have taxable income.

--Peter
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Then you haven't yet received the interest for tax purposes. Only when it is available to be withdrawn is it actually paid to you. And that is when it becomes taxable.

Peter, this isn't true, is it? If you have a multi year CD, its taxable income each year, regardless of whether you have withdrawal ability, right?

Now, this is true for CD of shorter terms (6 months or less? or is it a year or less?). But I woulda sworn that longer term CDs are definitely taxed each year - a 5 year CD with withdrawal penalties and no check option is not taxed like a EE savings bond.
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Then you haven't yet received the interest for tax purposes. Only when it is available to be withdrawn is it actually paid to you. And that is when it becomes taxable.


I believe you could but you wouldn't be able to the the yield advertised at the cu.

I elected to reinvest the div to get a better yield.


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Peter, this isn't true, is it? If you have a multi year CD, its taxable income each year, regardless of whether you have withdrawal ability, right?

You are correct. I will blame lack of sleep for my less than clear thinking.

My comments are correct only for CDs with an original maturity of 1 year or less. Longer term CDs require slightly different treatment.

My ultimate point is that the 1099-INT from the Credit Union has a very high liklihood of being correct. The CU works with these all the time and knows how to report them correctly. Any errors are more likely to come in the form of omitting a CD entirely or including an account that is not the taxpayer's.

And my other point is that using the monthly interest accrual is NOT the correct way to calculate reportable interest income for CDs with an initial term of 1 year or less. Using these short-term CDs is a long-established way to defer a bit of income to a later calendar year.

--Peter
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I went ahead and scheduled a apointment with a CPA for next month on the 10th of March. At least when it done I won't be late!

Thanks guys for your help.


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