If you earned interest on money in your bank account, then you are obligated to report these earnings on your income tax return. It doesn’t matter if you’ve earned $10 or $100 in bank interest payments. You must report these payments because they are considered taxable by the federal government.
Of course, there may be people who fail to report the bank interest they’ve earned. This is not a smart thing to do because banks report interest payment information directly to the Internal Revenue Service. This means the IRS already knows you’ve received those payments.
So, if you fail to report the interest on your income tax return, then your tax return will get flagged for review. This could potentially lead to an audit, which is certainly not a pleasant experience. That is why it is important to not only have the intention of reporting your bank interest but to also learn how to add it to your income tax return.
Form 1099-INT
Within the first 3 months of every year, your bank will send you Form 1099-INT in the mail. This form shows you the total amount of bank interest that you earned for the specified year. You will see this amount in Box 1. That is the amount you need to report on your tax return.
You will receive a 1099-INT from each bank that paid you interest income.
Most people earn interest from a savings account, but you may also earn it from holding treasury notes, municipal bonds, and savings bonds. This interest gets reported as well.
How Do You Add Bank Interest to Your Income Tax Return?
Your interest payments are added to Form 1040 on Line 2b. Starting with the 2018 tax year, the old Form 1040-A (Line 8a) and Form 1040-EZ (Line 2) will no longer be used. Tax exempt interest, such as from some municipal bonds, gets added to Form 1040 on Line 2a.
if the total amount of interest you’ve received is more than $1,500 in one year, report it on a supplemental tax form called Schedule B. There is a separate line for each different of the entities or sources you’ve received interest income from.
You can use this form to add up the total dividends and interest payments you’ve collected in total. If you’ve made less than $1,500 in interest, you can still use Schedule B if you want to. The main requirement is whether or not you make more than $1,500 in interest.
Banks.org does not provide tax, accounting, or legal advice. This article is for informational purposes only, and is not intended to provide, and should not be relied on for, tax, accounting, or legal advice. Readers should consult their tax advisors concerning their particular situations.
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