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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 Only when it is available to be withdrawn is it actually paid to you.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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