What is an IRS Form 1099-OID?
IRS 1099-OID Form - Overview
Updated on September 30, 2024 - 04.00 PM by Admin, TaxBandits
Form 1099-OID is an IRS tax form that is used to report OID taxes on certain debt instruments. It is submitted by the holder of debt instruments (bonds, notes, certificates of deposit (CDs), etc.) which were issued at a discount price less than the actual redemption price when it matured.
In this article, we cover the following topics:
- What is Form 1099-OID?
- What is Original Issue Discount (OID)?
- What is a 1099-OID Form used for?
- Who Must File Form 1099-OID?
- What Information is Required to File Form 1099-OID?
- When is the Deadline to File Form 1099-OID?
- What are the Penalties for not Filing Form 1099-OID?
- IRS Form 1099-OID Filing Methods
- How to E-file Form 1099-OID With TaxBandits?
1. What is Form 1099-OID?
Form 1099-OID, "Original Issue Discount," is an IRS tax form used to report income earned from the original issue discount (OID) on certain debt instruments. OID occurs when a debt instrument, such as a bond or note, is issued at a price lower than its face value, which is the amount you can redeem it for when the bond matures or expires.
For example, let's assume you sold a bond with a face value of $500 at a discount price of $400 to an investor. At the time when the bond matures, the bondholder will receive the face amount of $500 despite paying only $400 for the bond. The Discount Price (OID) is treated as taxable because it accrues over the term of the bond.
2. What is Original Issue Discount (OID)?
An Original Issue Discount (OID) is a type of interest that occurs when a bond or debt instrument is issued at a price lower than its face value. This means the bond is sold at a discount. The OID is the difference between the bond's face value (the amount you'll receive when the bond matures) and the price you initially paid. Essentially, it's the amount you save by buying the bond at a discount, and this discount is treated as interest income that accrues over the life of the bond.
3. What is a 1099-OID Form used for?
The Form 1099-OID is used to report the OID (Original Issued Discount) included in your taxable income of at least $10. However, the rule of including OID in your gross income is generally not applicable to tax-exempt obligations, U.S. Savings bonds, and loans of $10,000 or less (between individuals who do not belong to financial business).
4. Who Must File Form 1099-OID?
Generally, the holder of the debt instruments is required to file Form 1099-OID. As for the investors, they do not need to issue Form 1099-OID unless they pay OID to another person.
Form 1099-OID must be issued in the following scenarios:
- When someone receives reportable OID includible in the gross income of at least $10
- When they withhold and pay any foreign exchange tax on OID for someone
- When they withhold and didn’t refund any federal tax under the backup withholding rule for someone. Even if the amount is less than $10.
5. What Information is Required to File Form 1099-OID?
When filing Form 1099-OID, make sure you have the following information handy.
- Payer Information: The name, address, and taxpayer identification number (TIN) of the payer.
- Recipient Information: The name, address, and TIN (usually the Social Security Number or Employer Identification Number) of the recipient.
- OID Amounts: The total original issue discount income earned by the recipient during the tax year.
- Tax-Exempt OID: If applicable, the amount of tax-exempt OID.
- Federal Income Tax Withheld: Any federal income tax withheld from the OID income.
It is important to verify that all details are accurate and complete to ensure proper reporting and to avoid issues with the IRS.
6. When is the Deadline to File Form 1099-OID?
The deadline to file Form 1099-OID for the 2024 tax year is as follows:
- E-filing deadline - March 31, 2025.
- Recipient copy distribution deadline - February 28, 2025.
- Paper filing deadline - January 31, 2025
7. What are the Penalties for not Filing Form 1099-OID?
Filing the 1099-OID with the IRS before the deadline is crucial. Failure to do so may result in penalties based on how late you file. Penalties can be incurred for furnishing incorrect information, failure to provide required information, and late filing of returns.
The penalties may range from $60 to $630 per form, based on the size of the business and when you file your return.
| Delaying period | Large Businesses with Gross Receipts of More Than $5 Million | Small Businesses with Gross Receipts $5 Million or Less |
|---|---|---|
| Filed up to 30 days late | $60/ form to a maximum penalty $664,500/ year | $60/ form to a maximum penalty $232,500/ year |
| Filed after 30 days but before August 1 | $130/ form to a maximum penalty of $1,993,500 /year | $130/ form to a maximum penalty $664,500/ year |
| Filed after August 1 or not at all | $330/form to a maximum penalty $3,987,000 | $330/ form to a maximum penalty $1,329,000/ year |
| Intentional Disregard of Filing Requirements | $630/form- No maximum limitation | $630/form- No maximum limitation |
8. IRS Form 1099-OID Filing Methods
Filling Form 1099-OID can be filed using one of two different methods, Paper filing or E-filing.
Paper filing:
The IRS accepts paper copies of Form 1099-OID. However, if you are filing more than 10 aggregate returns, businesses are required to e-file. Paper filing is quite time-consuming, and you may not know the filing status.
Electronic filing:
E-filing is the most accurate, and nowadays the most common method of filing tax forms. The IRS recommends e-filing as opposed to filing paper copies. Electronic copies are generally more accurate, contain far fewer errors, and the IRS status of these returns can be tracked.
TaxBandits supports e-filing Form 1099-OID. Get started today and get the seamless efile experience that TaxBandits has to offer!
Note: Based on the filing method you choose, the deadline varies. If you prefer paper filing, submit the forms to the IRS on or before February 28th, 2025. If you choose to e-file Form 1099-OID, the deadline will be March 31st, 2025.
9. E-file Form 1099-OID With TaxBandits in Minutes
TaxBandits is an IRS-authorized e-file provider that supports a variety of payroll and employment tax forms, including Forms 1099, W-2, 94x, 1095, and more.
- Step 1: Create an account with TaxBandits
- Step 2: Enter the necessary information on Form 1099-OID
- Step 3: Review and transmit the form to the IRS
Get started with TaxBandits today. E-file Form 1099-OID in minutes and get instant updates about the filing status. Pricing starts as low as $0.80/form.
