Form 1099-OID, also known as the 1099 Original Issue Discount, is used to report income generated from a specific type of interest. Those who need to file this form include the following cases:
- If the original issue discount includible in gross income is at least $10
- For any person for whom you withheld and paid any foreign tax on OID
- From whom you withheld (and did not refund) and federal income tax under the backup withholding rules even if the amount of the OID is less than $10.
Form 1099-OID is not a very common form, but if you need to file it, it is important to have a software tool that can help you out. 1099 Original Issue Discount fraud is common, and you don’t want a simple mistake or miscalculation to send the wrong signal. The software tools available from Advanced Micro Solutions ensure you file this form quickly and efficiently without mistakes.
What is OID?
OID, also known as original issue discount, is a form of interest on a bond that was issued after 1984. This is taxable as it accrues over the term of the bond. OID usually occurs when a company issues bonds at a price less than their redemption value at maturity. The difference between these amounts is the OID. Essentially, those who hold bonds with OIDs got a great deal on a bond and must pay taxes on the discount.
The bond issuer will send the recipient the 1099 designed for original issue discounts, which shows the amount of OID to include as income. This issuer is the entity that needs a reliable tax software to do this correctly – either a business, company, or other group that can issue bonds.
It is important to know that fraud with this form is common. This fraud occurs when the form uses false withholding information to reduce the overall amount of taxable income. Those who commit this fraud allege that the withheld amount exists in a secret bank account. The IRS has taken notice of these fraud schemes and successfully prosecuted them, and individual entities distributing this type of 1099 have nothing to worry about. That said, if a recipient is not expecting to receive the document, it may be useful to include a note before issuing.
Form 1099-OID vs 1099-INT
It is not necessary to file both Form 1099-INT and 1099-OID. On the later, you can report the qualified stated interest in box 2 and the OID in box 1, 8, or 11 as applicable. The IRS has special instructions for those in this unique position who cannot figure out which form to use.
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How Software Filing Support Can Help
Form 1099-OID requires data input and basic calculations, but it also tends to be distributed in bulk. If your company distributes this type of 1099, you’re likely dealing with several dozen individuals instead of a handful. Completing this manually is out of the question, but a semi-automated software solution can save both time and money. This is how our W-2 and 1099 Software can help. Our software is equipped to handle every type of 1099 and W2, and updates to forms are automatically included. The experience is seamless and intuitive, but if you have questions about the product, give our Sales and Information team a call at 800-536-1099.