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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.

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