Documents imputed interest income from debt instruments purchased below face value.

• OID amount (Box 1) - taxable interest income
• Interest income (Box 2) - for instruments paying current interest
• Foreign tax paid (Box 3) - if applicable
• Investment expenses (Box 4) - for certain tax-exempt OID bonds
• Market discount (Box 5) - if applicable

• Investors in zero-coupon bonds
• Holders of Treasury bills and STRIPS
• Purchasers of corporate bonds issued at discount
• Owners of certain debt instruments with original issue discount > $10
• Investors in certificates of deposit (CDs) with term > 1 year

• OID is taxable annually as interest income, even if not received in cash
• Different rules apply for short-term vs. long-term instruments
• Special treatment for tax-exempt municipal bonds
• Potential foreign tax credit opportunities
• Basis adjustment required for the accrued OID

Filing requirements:

• Report OID income on Schedule B (Form 1040) unless tax-exempt
• Include in total interest income on Form 1040
• Claim foreign tax credit if applicable (Form 1116)
• Adjust cost basis for the accrued OID
• Special reporting for market discount bonds

• Maintain complete records of bond purchases and maturities
• Understand the difference between OID and market discount
• Be aware of de minimis OID rules (less than 0.25% × years to maturity)
• Consider tax implications when choosing between discount and coupon bonds
• Review OID calculations for accuracy

• Schedule B (Interest and Ordinary Dividends)
• Form 1040 (U.S. Individual Tax Return)
• Form 1116 (Foreign Tax Credit)
• Publication 1212 (Guide to OID Instruments)
• Form 8949 (Sales of Capital Assets, if selling OID instruments)
• Form 1099-B
• Form 1099-INT
• Form 1099-DIV
• Form 1099-K