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Filing 2012 Tax Returns

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Filing 2012 Tax Returns

Filing 2012 tax returns Publication 1212 - Main Content Table of Contents Definitions Debt Instruments on the OID List Debt Instruments Not on the OID List Information for Brokers and Other MiddlemenShort-Term Obligations Redeemed at Maturity Long-Term Debt Instruments Certificates of Deposit Bearer Bonds and Coupons Backup Withholding Information for Owners of OID Debt InstrumentsExceptions. Filing 2012 tax returns Adjustment for premium. Filing 2012 tax returns Adjustment for acquisition premium. Filing 2012 tax returns Adjustment for market discount. Filing 2012 tax returns Form 1099-OID How To Report OID Figuring OID on Long-Term Debt Instruments Figuring OID on Stripped Bonds and Coupons How To Get Tax HelpLow Income Taxpayer Clinics Definitions The following terms are used throughout this publication. Filing 2012 tax returns “Original issue discount” is defined first. Filing 2012 tax returns The other terms are listed alphabetically. Filing 2012 tax returns Original issue discount (OID). Filing 2012 tax returns   OID is a form of interest. Filing 2012 tax returns It is the excess of a debt instrument's stated redemption price at maturity over its issue price (acquisition price for a stripped bond or coupon). Filing 2012 tax returns Zero coupon bonds and debt instruments that pay no stated interest until maturity are examples of debt instruments that have OID. Filing 2012 tax returns Accrual period. Filing 2012 tax returns   An accrual period is an interval of time used to measure OID. Filing 2012 tax returns The length of an accrual period can be 6 months, a year, or some other period, depending on when the debt instrument was issued. Filing 2012 tax returns Acquisition premium. Filing 2012 tax returns   Acquisition premium is the excess of a debt instrument's adjusted basis immediately after purchase, including purchase at original issue, over the debt instrument's adjusted issue price at that time. Filing 2012 tax returns A debt instrument does not have acquisition premium, however, if the debt instrument was purchased at a premium. Filing 2012 tax returns See Premium, later. Filing 2012 tax returns Adjusted issue price. Filing 2012 tax returns   The adjusted issue price of a debt instrument at the beginning of an accrual period is used to figure the OID allocable to that period. Filing 2012 tax returns In general, the adjusted issue price at the beginning of the debt instrument's first accrual period is its issue price. Filing 2012 tax returns The adjusted issue price at the beginning of any subsequent accrual period is the sum of the issue price and all the OID includible in income before that accrual period minus any payment previously made on the debt instrument, other than a payment of qualified stated interest. Filing 2012 tax returns Debt instrument. Filing 2012 tax returns   The term “debt instrument” means any instrument or contractual arrangement that constitutes indebtedness under general principles of federal income tax law (including, for example, a bond, debenture, note, certificate, or other evidence of indebtedness). Filing 2012 tax returns It generally does not include an annuity contract. Filing 2012 tax returns Issue price. Filing 2012 tax returns   For debt instruments listed in Section I-A and Section I-B, the issue price generally is the initial offering price to the public (excluding bond houses and brokers) at which a substantial amount of these instruments was sold. Filing 2012 tax returns Market discount. Filing 2012 tax returns   Market discount arises when a debt instrument purchased in the secondary market has decreased in value since its issue date, generally because of an increase in interest rates. Filing 2012 tax returns An OID debt instrument has market discount if your adjusted basis in the debt instrument immediately after you acquired it (usually its purchase price) was less than the debt instrument's issue price plus the total OID that accrued before you acquired it. Filing 2012 tax returns The market discount is the difference between the issue price plus accrued OID and your adjusted basis. Filing 2012 tax returns Premium. Filing 2012 tax returns   A debt instrument is purchased at a premium if its adjusted basis immediately after purchase is greater than the total of all amounts payable on the debt instrument after the purchase date, other than qualified stated interest. Filing 2012 tax returns The premium is the excess of the adjusted basis over the payable amounts. Filing 2012 tax returns See Publication 550 for information on the tax treatment of bond premium. Filing 2012 tax returns Qualified stated interest. Filing 2012 tax returns   In general, qualified stated interest is stated interest that is unconditionally payable in cash or property (other than debt instruments of the issuer) at least annually over the term of the debt instrument at a single fixed rate. Filing 2012 tax returns Stated redemption price at maturity. Filing 2012 tax returns   A debt instrument's stated redemption price at maturity is the sum of all amounts (principal and interest) payable on the debt instrument other than qualified stated interest. Filing 2012 tax returns Yield to maturity (YTM). Filing 2012 tax returns   In general, the YTM is the discount rate that, when used in figuring the present value of all principal and interest payments, produces an amount equal to the issue price of the debt instrument. Filing 2012 tax returns The YTM is generally shown on the face of the debt instrument or in the literature you receive from your broker. Filing 2012 tax returns If you do not have this information, consult your broker, tax advisor, or the issuer. Filing 2012 tax returns Debt Instruments on the OID List The OID list on the IRS website can be used by brokers and other middlemen to prepare information returns. Filing 2012 tax returns If you own a listed debt instrument, you generally should not rely on the information in the OID list to determine (or compare) the OID to be reported on your tax return. Filing 2012 tax returns The OID amounts listed are figured without reference to the price or date at which you acquired the debt instrument. Filing 2012 tax returns For information about determining the OID to be reported on your tax return, see the instructions for figuring OID under Information for Owners of OID Debt Instruments, later. Filing 2012 tax returns The following discussions explain what information is contained in each section of the list. Filing 2012 tax returns Section I. Filing 2012 tax returns   This section contains publicly offered, long-term debt instruments. Filing 2012 tax returns Section I-A: Corporate Debt Instruments Issued Before 1985. Filing 2012 tax returns Section I-B: Corporate Debt Instruments Issued After 1984. Filing 2012 tax returns Section I-C: Inflation-Indexed Debt Instruments. Filing 2012 tax returns For each publicly offered debt instrument in Section I, the list contains the following information. Filing 2012 tax returns The name of the issuer. Filing 2012 tax returns The Committee on Uniform Security Identification Procedures (CUSIP) number. Filing 2012 tax returns The issue date. Filing 2012 tax returns The maturity date. Filing 2012 tax returns The issue price expressed as a percent of principal or of stated redemption price at maturity. Filing 2012 tax returns The annual stated or coupon interest rate. Filing 2012 tax returns (This rate is shown as 0. Filing 2012 tax returns 00 if no annual interest payments are provided. Filing 2012 tax returns ) The yield to maturity will be added to Section I-B for bonds issued after December 31, 2006. Filing 2012 tax returns The total OID accrued up to January 1 of a calendar year. Filing 2012 tax returns (This information is not available for every instrument. Filing 2012 tax returns ) For long-term debt instruments issued after July 1, 1982, the daily OID for the accrual periods falling in a calendar year and a subsequent year. Filing 2012 tax returns The total OID per $1,000 of principal or maturity value for a calendar year and a subsequent year. Filing 2012 tax returns Section II. Filing 2012 tax returns   This section contains stripped coupons and principal components of U. Filing 2012 tax returns S. Filing 2012 tax returns Treasury and Government-Sponsored Enterprise debt instruments. Filing 2012 tax returns These stripped components are available through the Department of the Treasury's Separate Trading of Registered Interest and Principal of Securities (STRIPS) program and government-sponsored enterprises such as the Resolution Funding Corporation. Filing 2012 tax returns This section also includes debt instruments backed by U. Filing 2012 tax returns S. Filing 2012 tax returns Treasury securities that represent ownership interests in those securities. Filing 2012 tax returns   The obligations listed in Section II are arranged by maturity date. Filing 2012 tax returns The amounts listed are the total OID for a calendar year per $1,000 of redemption price. Filing 2012 tax returns Section III. Filing 2012 tax returns   This section contains short-term discount obligations. Filing 2012 tax returns Section III-A: Short-Term U. Filing 2012 tax returns S. Filing 2012 tax returns Treasury Bills. Filing 2012 tax returns Section III-B: Federal Home Loan Banks. Filing 2012 tax returns Section III-C: Federal National Mortgage Association. Filing 2012 tax returns Section III-D: Federal Farm Credit Banks. Filing 2012 tax returns Section III-E: Federal Home Loan Mortgage Corporation. Filing 2012 tax returns Section III-F: Federal Agricultural Mortgage Corporation. Filing 2012 tax returns    Information that supplements Section III-A is available on the Internet at http://www. Filing 2012 tax returns treasurydirect. Filing 2012 tax returns gov/tdhome. Filing 2012 tax returns htm. Filing 2012 tax returns   The short-term obligations listed in this section are arranged by maturity date. Filing 2012 tax returns For each obligation, the list contains the CUSIP number, maturity date, issue date, issue price (expressed as a percent of principal), and discount to be reported as interest for a calendar year per $1,000 of redemption price. Filing 2012 tax returns Brokers and other middlemen should rely on the issue price information in Section III only if they are unable to determine the price actually paid by the owner. Filing 2012 tax returns Debt Instruments Not on the OID List The list of debt instruments discussed earlier does not contain the following items. Filing 2012 tax returns U. Filing 2012 tax returns S. Filing 2012 tax returns savings bonds. Filing 2012 tax returns Certificates of deposit and other face-amount certificates issued at a discount, including syndicated certificates of deposit. Filing 2012 tax returns Obligations issued by tax-exempt organizations. Filing 2012 tax returns OID debt instruments that matured or were entirely called by the issuer before the tables were posted on the IRS website. Filing 2012 tax returns Mortgage-backed securities and mortgage participation certificates. Filing 2012 tax returns Long-term OID debt instruments issued before May 28, 1969. Filing 2012 tax returns Short-term obligations, other than the obligations listed in Section III. Filing 2012 tax returns Debt instruments issued at a discount by states or their political subdivisions. Filing 2012 tax returns REMIC regular interests and CDOs. Filing 2012 tax returns Commercial paper and banker's acceptances issued at a discount. Filing 2012 tax returns Obligations issued at a discount by individuals. Filing 2012 tax returns Foreign obligations not traded in the United States and obligations not issued in the United States. Filing 2012 tax returns Information for Brokers and Other Middlemen The following discussions contain specific instructions for brokers and middlemen who hold or redeem a debt instrument for the owner. Filing 2012 tax returns In general, you must file a Form 1099 for the debt instrument if the interest or OID to be included in the owner's income for a calendar year totals $10 or more. Filing 2012 tax returns You also must file a Form 1099 if you were required to deduct and withhold tax, even if the interest or OID is less than $10. Filing 2012 tax returns See Backup Withholding, later. Filing 2012 tax returns If you must file a Form 1099, furnish a copy to the owner of the debt instrument by January 31 in the year it is due. Filing 2012 tax returns File all your Forms 1099 with the IRS, accompanied by Form 1096, by February 28 in the year it is due (March 31 if you file electronically). Filing 2012 tax returns Electronic payee statements. Filing 2012 tax returns   You can issue Form 1099-OID electronically with the consent of the recipient. Filing 2012 tax returns More information. Filing 2012 tax returns   For more information, including penalties for failure to file (or furnish) required information returns or statements, see the General Instructions for Certain Information Returns (Forms 1098, 1099, 3921, 3922, 5498, and W-2G) for the appropriate calendar year. Filing 2012 tax returns Short-Term Obligations Redeemed at Maturity If you redeem a short-term discount obligation for the owner at maturity, you must report the discount as interest on Form 1099-INT. Filing 2012 tax returns To figure the discount, use the purchase price shown on the owner's copy of the purchase confirmation receipt or similar record, or the price shown in your transaction records. Filing 2012 tax returns If you sell the obligation for the owner before maturity, you must file Form 1099-B to reflect the gross proceeds to the seller. Filing 2012 tax returns Do not report the accrued discount to the date of sale on either Form 1099-INT or Form 1099-OID. Filing 2012 tax returns If the owner's purchase price cannot be determined, figure the discount as if the owner had purchased the obligation at its original issue price. Filing 2012 tax returns A special rule is used to determine the original issue price for information reporting on U. Filing 2012 tax returns S. Filing 2012 tax returns Treasury bills (T-bills) listed in Section III-A. Filing 2012 tax returns Under this rule, you treat as the original issue price of the T-bill the noncompetitive (weighted average of accepted auction bids) discount price for the longest-maturity T-bill maturing on the same date as the T-bill being redeemed. Filing 2012 tax returns This noncompetitive discount price is the issue price (expressed as a percent of principal) shown in Section III-A. Filing 2012 tax returns A similar rule is used to figure the discount on short-term discount obligations issued by the organizations listed in Section III-B through Section III-F. Filing 2012 tax returns Example 1. Filing 2012 tax returns There are 13-week and 26-week T-bills maturing on the same date as the T-bill being redeemed. Filing 2012 tax returns The price actually paid by the owner cannot be established by owner or middleman records. Filing 2012 tax returns You treat as the issue price of the T-bill the noncompetitive discount price (expressed as a percent of principal) shown in Section III-A for a 26-week bill maturing on the same date as the T-bill redeemed. Filing 2012 tax returns The interest you report on Form 1099-INT is the OID (per $1,000 of principal) shown in Section III-A for that obligation. Filing 2012 tax returns Long-Term Debt Instruments If you hold a long-term OID debt instrument as a nominee for the true owner, you generally must file Form 1099-OID. Filing 2012 tax returns For this purpose, you can rely on Section I of the OID list to determine the following information. Filing 2012 tax returns Whether a debt instrument has OID. Filing 2012 tax returns The OID to be reported on the Form 1099-OID. Filing 2012 tax returns In general, you must report OID on publicly offered, long-term debt instruments listed in Section I. Filing 2012 tax returns You also can report OID on other long-term debt instruments. Filing 2012 tax returns Form 1099-OID. Filing 2012 tax returns   On Form 1099-OID for a calendar year show the following information. Filing 2012 tax returns Box 1. Filing 2012 tax returns The OID for the actual dates the owner held the debt instruments during a calendar year. Filing 2012 tax returns To determine this amount, see Figuring OID, next. Filing 2012 tax returns Box 2. Filing 2012 tax returns The qualified stated interest paid or credited during the calendar year. Filing 2012 tax returns Interest reported here is not reported on Form 1099-INT. Filing 2012 tax returns The qualified stated interest on Treasury inflation-protected securities may be reported on Form 1099-INT in box 3 instead. Filing 2012 tax returns Box 3. Filing 2012 tax returns Any interest or principal forfeited because of an early withdrawal that the owner can deduct from gross income. Filing 2012 tax returns Do not reduce the amounts in boxes 1 and 2 by the forfeiture. Filing 2012 tax returns Box 4. Filing 2012 tax returns Any backup withholding for this debt instrument. Filing 2012 tax returns Box 7. Filing 2012 tax returns The CUSIP number, if any. Filing 2012 tax returns If there is no CUSIP number, give a description of the debt instrument, including the abbreviation for the stock exchange, the abbreviation used by the stock exchange for the issuer, the coupon rate, and the year of maturity (for example, NYSE XYZ 12. Filing 2012 tax returns 50 2006). Filing 2012 tax returns If the issuer of the debt instrument is other than the payer, show the name of the issuer in this box. Filing 2012 tax returns Box 8. Filing 2012 tax returns The OID on a U. Filing 2012 tax returns S. Filing 2012 tax returns Treasury obligation for the part of the year the owner held the debt instrument. Filing 2012 tax returns Box 9. Filing 2012 tax returns Investment expenses passed on to holders of a single-class REMIC. Filing 2012 tax returns Boxes 10-12. Filing 2012 tax returns Use to report any state income tax withheld for this debt instrument. Filing 2012 tax returns Figuring OID. Filing 2012 tax returns   You can determine the OID on a long-term debt instrument by using either of the following. Filing 2012 tax returns Section I of the OID list. Filing 2012 tax returns The income tax regulations. Filing 2012 tax returns Using Section I. Filing 2012 tax returns   If the owner held the debt instrument for the entire calendar year, report the OID shown in Section I for the calendar year. Filing 2012 tax returns Because OID is listed for each $1,000 of stated redemption price at maturity, you must adjust the listed amount to reflect the debt instrument's actual stated redemption price at maturity. Filing 2012 tax returns For example, if the debt instrument's stated redemption price at maturity is $500, report one-half the listed OID. Filing 2012 tax returns   If the owner held the debt instrument for less than the entire calendar year, figure the OID to report as follows. Filing 2012 tax returns Look up the daily OID for the first accrual period in the calendar year during which the owner held the debt instrument. Filing 2012 tax returns Multiply the daily OID by the number of days the owner held the debt instrument during that accrual period. Filing 2012 tax returns Repeat steps (1) and (2) for any remaining accrual periods for the year during which the owner held the debt instrument. Filing 2012 tax returns Add the results in steps (2) and (3) to determine the owner's OID per $1,000 of stated redemption price at maturity. Filing 2012 tax returns If necessary, adjust the OID in (4) to reflect the debt instrument's stated redemption price at maturity. Filing 2012 tax returns Report the result on Form 1099-OID in box 1. Filing 2012 tax returns Using the income tax regulations. Filing 2012 tax returns   Instead of using Section I to figure OID, you can use the regulations under sections 1272 through 1275 of the Internal Revenue Code. Filing 2012 tax returns For example, under the regulations, you can use monthly accrual periods in figuring OID for a debt instrument issued after April 3, 1994, that provides for monthly payments. Filing 2012 tax returns (If you use Section I-B, the OID is figured using 6-month accrual periods. Filing 2012 tax returns )   For a general explanation of the rules for figuring OID under the regulations, see Figuring OID on Long-Term Debt Instruments under Information for Owners of OID Debt Instruments, later. Filing 2012 tax returns Certificates of Deposit If you hold a bank certificate of deposit (CD) as a nominee, you must determine whether the CD has OID and any OID includible in the income of the owner. Filing 2012 tax returns You must file an information return showing the reportable interest and OID, if any, on the CD. Filing 2012 tax returns These rules apply whether or not you sold the CD to the owner. Filing 2012 tax returns Report OID on a CD in the same way as OID on other debt instruments. Filing 2012 tax returns See Short-Term Obligations Redeemed at Maturity and Long-Term Debt Instruments, earlier. Filing 2012 tax returns Bearer Bonds and Coupons If a coupon from a bearer bond is presented to you for collection before the bond matures, you generally must report the interest on Form 1099-INT. Filing 2012 tax returns However, do not report the interest if either of the following apply. Filing 2012 tax returns You hold the bond as a nominee for the true owner. Filing 2012 tax returns The payee is a foreign person. Filing 2012 tax returns See Payments to foreign person under Backup Withholding, later. Filing 2012 tax returns Because you cannot assume the presenter of the coupon also owns the bond, you should not report OID on the bond on Form 1099-OID. Filing 2012 tax returns The coupon may have been “stripped” (separated) from the bond and separately purchased. Filing 2012 tax returns However, if a long-term bearer bond on the OID list is presented to you for redemption upon call or maturity, you should prepare a Form 1099-OID showing the OID for that calendar year, as well as any coupon interest payments collected at the time of redemption. Filing 2012 tax returns Backup Withholding If you report OID on Form 1099-OID or interest on Form 1099-INT for a calendar year, you may be required to apply backup withholding to the reportable payment at a rate of 28%. Filing 2012 tax returns The backup withholding is deducted at the time a cash payment is made. Filing 2012 tax returns See Pub. Filing 2012 tax returns 1281, Backup Withholding for Missing and Incorrect Name/TIN(s), for more information. Filing 2012 tax returns Backup withholding generally applies in the following situations. Filing 2012 tax returns The payee does not give you a taxpayer identification number (TIN). Filing 2012 tax returns The IRS notifies you that the payee gave an incorrect TIN. Filing 2012 tax returns The IRS notifies you that the payee is subject to backup withholding due to payee underreporting. Filing 2012 tax returns For debt instruments acquired after 1983: The payee does not certify, under penalties of perjury, that he or she is not subject to backup withholding under (3), or The payee does not certify, under penalties of perjury, that the TIN given is correct. Filing 2012 tax returns However, for short-term discount obligations (other than government obligations), bearer bonds and coupons, and U. Filing 2012 tax returns S. Filing 2012 tax returns savings bonds, backup withholding applies only if the payee does not give you a TIN or gives you an obviously incorrect number for a TIN. Filing 2012 tax returns Short-term obligations. Filing 2012 tax returns   Backup withholding applies to OID on a short-term obligation only when the OID is paid at maturity. Filing 2012 tax returns However, backup withholding applies to any interest payable before maturity when the interest is paid or credited. Filing 2012 tax returns   If the owner of a short-term obligation at maturity is not the original owner and can establish the purchase price of the obligation, the amount subject to backup withholding must be determined by treating the purchase price as the issue price. Filing 2012 tax returns However, you can choose to disregard that price if it would require significant manual intervention in the computer or recordkeeping system used for the obligation. Filing 2012 tax returns If the purchase price of a listed obligation is not established or is disregarded, you must use the issue price shown in Section III. Filing 2012 tax returns Long-term obligations. Filing 2012 tax returns   If no cash payments are made on a long-term obligation before maturity, backup withholding applies only at maturity. Filing 2012 tax returns The amount subject to backup withholding is the OID includible in the owner's gross income for the calendar year when the obligation matures. Filing 2012 tax returns The amount to be withheld is limited to the cash paid. Filing 2012 tax returns Registered long-term obligations with cash payments. Filing 2012 tax returns   If a registered long-term obligation has cash payments before maturity, backup withholding applies when a cash payment is made. Filing 2012 tax returns The amount subject to backup withholding is the total of the qualified stated interest (defined earlier under Definitions) and OID includible in the owner's gross income for the calendar year when the payment is made. Filing 2012 tax returns If more than one cash payment is made during the year, the OID subject to withholding for the year must be allocated among the expected cash payments in the ratio that each bears to the total of the expected cash payments. Filing 2012 tax returns For any payment, the required withholding is limited to the cash paid. Filing 2012 tax returns Payee not the original owner. Filing 2012 tax returns   If the payee is not the original owner of the obligation, the OID subject to backup withholding is the OID includible in the gross income of all owners during the calendar year (without regard to any amount paid by the new owner at the time of transfer). Filing 2012 tax returns The amount subject to backup withholding at maturity of a listed obligation must be determined using the issue price shown in Section I. Filing 2012 tax returns Bearer long-term obligations with cash payments. Filing 2012 tax returns   If a bearer long-term obligation has cash payments before maturity, backup withholding applies when the cash payments are made. Filing 2012 tax returns For payments before maturity, the amount subject to withholding is the qualified stated interest (defined earlier under Definitions) includible in the owner's gross income for the calendar year. Filing 2012 tax returns For a payment at maturity, the amount subject to withholding is only the total of any qualified stated interest paid at maturity and the OID includible in the owner's gross income for the calendar year when the obligation matures. Filing 2012 tax returns The required withholding at maturity is limited to the cash paid. Filing 2012 tax returns Sales and redemptions. Filing 2012 tax returns   If you report the gross proceeds from a sale, exchange, or redemption of a debt instrument on Form 1099-B for a calendar year, you may be required to withhold 28% of the amount reported. Filing 2012 tax returns Backup withholding applies in the following situations. Filing 2012 tax returns The payee does not give you a TIN. Filing 2012 tax returns The IRS notifies you that the payee gave an incorrect TIN. Filing 2012 tax returns For debt instruments held in an account opened after 1983, the payee does not certify, under penalties of perjury, that the TIN given is correct. Filing 2012 tax returns Payments outside the United States to U. Filing 2012 tax returns S. Filing 2012 tax returns person. Filing 2012 tax returns   The requirements for backup withholding and information reporting apply to payments of OID and interest made outside the United States to a U. Filing 2012 tax returns S. Filing 2012 tax returns person, a controlled foreign corporation, or a foreign person at least 50% of whose income for the preceding 3-year period is effectively connected with the conduct of a U. Filing 2012 tax returns S. Filing 2012 tax returns trade or business. Filing 2012 tax returns Payments to foreign person. Filing 2012 tax returns   The following discussions explain the rules for backup withholding and information reporting on payments to foreign persons. Filing 2012 tax returns U. Filing 2012 tax returns S. Filing 2012 tax returns -source amount. Filing 2012 tax returns   Backup withholding and information reporting are not required for payments of U. Filing 2012 tax returns S. Filing 2012 tax returns -source OID, interest, or proceeds from a sale or redemption of an OID instrument if the payee has given you proof (generally the appropriate Form W-8 or an acceptable substitute) that the payee is a foreign person. Filing 2012 tax returns A U. Filing 2012 tax returns S. Filing 2012 tax returns resident is not a foreign person. Filing 2012 tax returns For proof of the payee's foreign status, you can rely on the appropriate Form W-8 or on documentary evidence for payments made outside the United States to an offshore account or, in case of broker proceeds, a sale effected outside the United States. Filing 2012 tax returns Receipt of the appropriate Form W-8 does not relieve you from information reporting and backup withholding if you actually know the payee is a U. Filing 2012 tax returns S. Filing 2012 tax returns person. Filing 2012 tax returns   For information about the 28% withholding tax that may apply to payments of U. Filing 2012 tax returns S. Filing 2012 tax returns -source OID or interest to foreign persons, see Publication 515. Filing 2012 tax returns Foreign-source amount. Filing 2012 tax returns   Backup withholding and information reporting are not required for payments of foreign-source OID and interest made outside the United States. Filing 2012 tax returns However, if the payments are made inside the United States, the requirements for backup withholding and information reporting will apply unless the payee has given you the appropriate Form W-8 or acceptable substitute as proof that the payee is a foreign person. Filing 2012 tax returns More information. Filing 2012 tax returns   For more information about backup withholding and information reporting on foreign-source amounts or payments to foreign persons, see Regulations section 1. Filing 2012 tax returns 6049-5. Filing 2012 tax returns Information for Owners of OID Debt Instruments This section is for persons who prepare their own tax returns. Filing 2012 tax returns It discusses the income tax rules for figuring and reporting OID on long-term debt instruments. Filing 2012 tax returns It also includes a similar discussion for stripped bonds and coupons, such as zero coupon bonds available through the Department of the Treasury's STRIPS program and government-sponsored enterprises such as the Resolution Funding Corporation. Filing 2012 tax returns However, the information provided does not cover every situation. Filing 2012 tax returns More information can be found in the regulations under sections 1271 through 1275 of the Internal Revenue Code. Filing 2012 tax returns Including OID in income. Filing 2012 tax returns   Generally, you include OID in income as it accrues each year, whether or not you receive any payments from the debt instrument issuer. Filing 2012 tax returns Exceptions. Filing 2012 tax returns   The rules for including OID in income as it accrues generally do not apply to the following debt instruments. Filing 2012 tax returns U. Filing 2012 tax returns S. Filing 2012 tax returns savings bonds. Filing 2012 tax returns Tax-exempt obligations. Filing 2012 tax returns (However, see Tax-Exempt Bonds and Coupons, later. Filing 2012 tax returns ) Obligations issued by individuals before March 2, 1984. Filing 2012 tax returns Loans of $10,000 or less between individuals who are not in the business of lending money. Filing 2012 tax returns (The dollar limit includes outstanding prior loans by the lender to the borrower. Filing 2012 tax returns ) This exception does not apply if a principal purpose of the loan is to avoid any federal tax. Filing 2012 tax returns   See chapter 1 of Publication 550 for information about the rules for these and other types of discounted debt instruments, such as short-term and market discount obligations. Filing 2012 tax returns Publication 550 also discusses rules for holders of REMIC interests and CDOs. Filing 2012 tax returns De minimis rule. Filing 2012 tax returns   You can treat OID as zero if the total OID on a debt instrument is less than one-fourth of 1% (. Filing 2012 tax returns 0025) of the stated redemption price at maturity multiplied by the number of full years from the date of original issue to maturity. Filing 2012 tax returns Debt instruments with de minimis OID are not listed in this publication. Filing 2012 tax returns There are special rules to determine the de minimis amount in the case of debt instruments that provide for more than one payment of principal. Filing 2012 tax returns Also, the de minimis rules generally do not apply to tax-exempt obligations. Filing 2012 tax returns Example 2. Filing 2012 tax returns You bought at issuance a 10-year debt instrument with a stated redemption price at maturity of $1,000, issued at $980 with OID of $20. Filing 2012 tax returns One-fourth of 1% of $1,000 (the stated redemption price) times 10 (the number of full years from the date of original issue to maturity) equals $25. Filing 2012 tax returns Under the de minimis rule, you can treat the OID as zero because the $20 discount is less than $25. Filing 2012 tax returns Example 3. Filing 2012 tax returns Assume the same facts as Example 2, except the debt instrument was issued at $950. Filing 2012 tax returns You must report part of the $50 OID each year because it is more than $25. Filing 2012 tax returns Choice to report all interest as OID. Filing 2012 tax returns   Generally, you can choose to treat all interest on a debt instrument acquired after April 3, 1994, as OID and include it in gross income by using the constant yield method. Filing 2012 tax returns See Constant yield method under Debt Instruments Issued After 1984, later, for more information. Filing 2012 tax returns   For this choice, interest includes stated interest, acquisition discount, OID, de minimis OID, market discount, de minimis market discount, and unstated interest, as adjusted by any amortizable bond premium or acquisition premium. Filing 2012 tax returns For more information, see Regulations section 1. Filing 2012 tax returns 1272-3. Filing 2012 tax returns Purchase after date of original issue. Filing 2012 tax returns   A debt instrument you purchased after the date of original issue may have premium, acquisition premium, or market discount. Filing 2012 tax returns If so, the OID reported to you on Form 1099-OID may have to be adjusted. Filing 2012 tax returns For more information, see Showing an OID adjustment under How To Report OID, later. Filing 2012 tax returns The following rules generally do not apply to contingent payment debt instruments. Filing 2012 tax returns Adjustment for premium. Filing 2012 tax returns   If your debt instrument (other than an inflation-indexed debt instrument) has premium, do not report any OID as ordinary income. Filing 2012 tax returns Your adjustment is the total OID shown on your Form 1099-OID. Filing 2012 tax returns Adjustment for acquisition premium. Filing 2012 tax returns   If your debt instrument has acquisition premium, reduce the OID you report. Filing 2012 tax returns Your adjustment is the difference between the OID shown on your Form 1099-OID and the reduced OID amount figured using the rules explained later under Figuring OID on Long-Term Debt Instruments. Filing 2012 tax returns Adjustment for market discount. Filing 2012 tax returns   If your debt instrument has market discount that you choose to include in income currently, increase the OID you report. Filing 2012 tax returns Your adjustment is the accrued market discount for the year. Filing 2012 tax returns See Market Discount Bonds in chapter 1 of Publication 550 for information on how to figure accrued market discount and include it in your income currently and for other information about market discount bonds. Filing 2012 tax returns If you choose to use the constant yield method to figure accrued market discount, also see Figuring OID on Long-Term Debt Instruments, later. Filing 2012 tax returns The constant yield method of figuring accrued OID, explained in those discussions under Constant yield method, is also used to figure accrued market discount. Filing 2012 tax returns For more information concerning premium or market discount on an inflation-indexed debt instrument, see Regulations section 1. Filing 2012 tax returns 1275-7. Filing 2012 tax returns Sale, exchange, or redemption. Filing 2012 tax returns   Generally, you treat your gain or loss from the sale, exchange, or redemption of a discounted debt instrument as a capital gain or loss if you held the debt instrument as a capital asset. Filing 2012 tax returns If you sold the debt instrument through a broker, you should receive Form 1099-B or an equivalent statement from the broker. Filing 2012 tax returns Use the Form 1099-B or other statement and your brokerage statements to complete Form 8949, and Schedule D (Form 1040). Filing 2012 tax returns   Your gain or loss is the difference between the amount you realized on the sale, exchange, or redemption and your basis in the debt instrument. Filing 2012 tax returns Your basis, generally, is your cost increased by the OID you have included in income each year you held it. Filing 2012 tax returns In general, to determine your gain or loss on a tax-exempt bond, figure your basis in the bond by adding to your cost the OID you would have included in income if the bond had been taxable. Filing 2012 tax returns   See chapter 4 of Publication 550 for more information about the tax treatment of the sale or redemption of discounted debt instruments. Filing 2012 tax returns Example 4. Filing 2012 tax returns Larry, a calendar year taxpayer, bought a corporate debt instrument at original issue for $86,235. Filing 2012 tax returns 00 on November 1 of Year 1. Filing 2012 tax returns The 15-year debt instrument matures on October 31 of Year 16 at a stated redemption price of $100,000. Filing 2012 tax returns The debt instrument provides for semiannual payments of interest at 10%. Filing 2012 tax returns Assume the debt instrument is a capital asset in Larry's hands. Filing 2012 tax returns The debt instrument has $13,765. Filing 2012 tax returns 00 of OID ($100,000 stated redemption price at maturity minus $86,235. Filing 2012 tax returns 00 issue price). Filing 2012 tax returns Larry sold the debt instrument for $90,000 on November 1 of Year 4. Filing 2012 tax returns Including the OID he will report for the period he held the debt instrument in Year 4, Larry has included $4,556. Filing 2012 tax returns 00 of OID in income and has increased his basis by that amount to $90,791. Filing 2012 tax returns 00. Filing 2012 tax returns Larry has realized a loss of $791. Filing 2012 tax returns 00. Filing 2012 tax returns All of Larry's loss is capital loss. Filing 2012 tax returns Form 1099-OID The issuer of the debt instrument (or your broker, if you purchased or held the debt instrument through a broker) should give you a copy of Form 1099-OID or a similar statement if the accrued OID for the calendar year is $10 or more and the term of the debt instrument is more than 1 year. Filing 2012 tax returns Form 1099-OID shows all OID income in box 1 except OID on a U. Filing 2012 tax returns S. Filing 2012 tax returns Treasury obligation, which is shown in box 8. Filing 2012 tax returns It also shows, in box 2, any qualified stated interest you must include in income. Filing 2012 tax returns (However, any qualified stated interest on Treasury inflation-protected securities can be reported on Form 1099-INT in box 3. Filing 2012 tax returns ) A copy of Form 1099-OID will be sent to the IRS. Filing 2012 tax returns Do not attach your copy to your tax return. Filing 2012 tax returns Keep it for your records. Filing 2012 tax returns If you are required to file a tax return and you receive Form 1099-OID showing taxable amounts, you must report these amounts on your return. Filing 2012 tax returns A 20% accuracy-related penalty may be charged for underpayment of tax due to either negligence or disregard of rules and regulations or substantial understatement of tax. Filing 2012 tax returns Form 1099-OID not received. Filing 2012 tax returns   If you held an OID debt instrument for a calendar year but did not receive a Form 1099-OID, refer to the discussions under Figuring OID on Long-Term Debt Instruments, later, for information on the OID you must report. Filing 2012 tax returns Refiguring OID. Filing 2012 tax returns   You must refigure the OID shown on Form 1099-OID, in box 1 or box 8, to determine the proper amount to include in income if one of the following applies. Filing 2012 tax returns You bought the debt instrument at a premium or at an acquisition premium. Filing 2012 tax returns The debt instrument is a stripped bond or coupon (including zero coupon bonds backed by U. Filing 2012 tax returns S. Filing 2012 tax returns Treasury securities). Filing 2012 tax returns The debt instrument is a contingent payment or inflation-indexed debt instrument. Filing 2012 tax returns See the discussions under Figuring OID on Long-Term Debt Instruments or Figuring OID on Stripped Bonds and Coupons, later, for the specific computations. Filing 2012 tax returns Refiguring interest. Filing 2012 tax returns   If you disposed of a debt instrument or acquired it from another holder between interest dates, see the discussion under Bonds Sold Between Interest Dates in chapter 1 of Publication 550 for information about refiguring the interest shown on Form 1099-OID in box 2. Filing 2012 tax returns Nominee. Filing 2012 tax returns   If you are the holder of an OID debt instrument and you receive a Form 1099-OID that shows your taxpayer identification number and includes amounts belonging to another person, you are considered a “nominee. Filing 2012 tax returns ” You must file another Form 1099-OID for each actual owner, showing the OID for the owner. Filing 2012 tax returns Show the owner of the debt instrument as the “recipient” and you as the “payer. Filing 2012 tax returns ”   Complete Form 1099-OID and Form 1096 and file the forms with the Internal Revenue Service Center for your area. Filing 2012 tax returns You must also give a copy of the Form 1099-OID to the actual owner. Filing 2012 tax returns However, you are not required to file a nominee return to show amounts belonging to your spouse. Filing 2012 tax returns See the Form 1099 instructions for more information. Filing 2012 tax returns   When preparing your tax return, follow the instructions under Showing an OID adjustment in the next discussion. Filing 2012 tax returns How To Report OID Generally, you report your taxable interest and OID income on the interest line of Form 1040EZ, Form 1040A, or Form 1040. Filing 2012 tax returns Form 1040 or Form 1040A required. Filing 2012 tax returns   You must use Form 1040 or Form 1040A (you cannot use Form 1040EZ) under either of the following conditions. Filing 2012 tax returns You received a Form 1099-OID as a nominee for the actual owner. Filing 2012 tax returns Your total interest and OID income for the year was more than $1,500. Filing 2012 tax returns Form 1040 required. Filing 2012 tax returns   You must use Form 1040 (you cannot use Form 1040A or Form 1040EZ) if you are reporting more or less OID than the amount shown on Form 1099-OID, other than because you are a nominee. Filing 2012 tax returns For example, if you paid a premium or an acquisition premium when you purchased the debt instrument, you must use Form 1040 because you will report less OID than shown on Form 1099-OID. Filing 2012 tax returns Also, you must use Form 1040 if you were charged an early withdrawal penalty. Filing 2012 tax returns Where to report. Filing 2012 tax returns   List each payer's name (if a brokerage firm gave you a Form 1099, list the brokerage firm as the payer) and the amount received from each payer on Form 1040A, Schedule B, Part I, line 1, or Form 1040, Schedule B, line 1. Filing 2012 tax returns Include all OID and periodic interest shown on any Form 1099-OID, boxes 1, 2, and 8, you received for the tax year. Filing 2012 tax returns Also include any other OID and interest income for which you did not receive a Form 1099. Filing 2012 tax returns Showing an OID adjustment. Filing 2012 tax returns   If you use Form 1040 to report more or less OID than shown on Form 1099-OID, list the full OID on Schedule B, Part I, line 1, and follow the instructions under 1 or 2, next. Filing 2012 tax returns   If you use Form 1040A to report the OID shown on a Form 1099-OID you received as a nominee for the actual owner, list the full OID on Schedule B, Part I, line 1 and follow the instructions under 1. Filing 2012 tax returns If the OID, as adjusted, is less than the amount shown on Form 1099-OID, show the adjustment as follows. Filing 2012 tax returns Under your last entry on line 1, subtotal all interest and OID income listed on line 1. Filing 2012 tax returns Below the subtotal, write “Nominee Distribution” or “OID Adjustment” and show the OID you are not required to report. Filing 2012 tax returns Subtract that OID from the subtotal and enter the result on line 2. Filing 2012 tax returns If the OID, as adjusted, is more than the amount shown on Form 1099-OID, show the adjustment as follows. Filing 2012 tax returns Under your last entry on line 1, subtotal all interest and OID income listed on line 1. Filing 2012 tax returns Below the subtotal, write “OID Adjustment” and show the additional OID. Filing 2012 tax returns Add that OID to the subtotal and enter the result on line 2. Filing 2012 tax returns Figuring OID on Long-Term Debt Instruments How you figure the OID on a long-term debt instrument depends on the date it was issued. Filing 2012 tax returns It also may depend on the type of the debt instrument. Filing 2012 tax returns There are different rules for each of the following debt instruments. Filing 2012 tax returns Corporate debt instruments issued after 1954 and before May 28, 1969, and government debt instruments issued after 1954 and before July 2, 1982. Filing 2012 tax returns Corporate debt instruments issued after May 27, 1969, and before July 2, 1982. Filing 2012 tax returns Debt instruments issued after July 1, 1982, and before 1985. Filing 2012 tax returns Debt instruments issued after 1984 (other than debt instruments described in (5) and (6)). Filing 2012 tax returns Contingent payment debt instruments issued after August 12, 1996. Filing 2012 tax returns Inflation-indexed debt instruments (including Treasury inflation-protected securities) issued after January 5, 1997. Filing 2012 tax returns Zero coupon bonds. Filing 2012 tax returns   The rules for figuring OID on zero coupon bonds backed by U. Filing 2012 tax returns S. Filing 2012 tax returns Treasury securities are discussed under Figuring OID on Stripped Bonds and Coupons, later. Filing 2012 tax returns Corporate Debt Instruments Issued After 1954 and Before May 28, 1969, and Government Debt Instruments Issued After 1954 and Before July 2, 1982 If you hold these debt instruments as capital assets, you include OID in income only in the year the debt instrument is sold, exchanged, or redeemed, and only if you have a gain. Filing 2012 tax returns The OID, which is taxed as ordinary income, generally equals the following amount. Filing 2012 tax returns   number of full months you held the debt instrument  number of full months from date of original issue to date of maturity X original issue discount The balance of the gain is capital gain. Filing 2012 tax returns If there is a loss on the sale of the debt instrument, the entire loss is a capital loss and no OID is reported. Filing 2012 tax returns Corporate Debt Instruments Issued After May 27, 1969, and Before July 2, 1982 If you hold these debt instruments as capital assets, you must include part of the OID in income each year you own the debt instruments. Filing 2012 tax returns For information about showing the correct OID on your tax return, see the discussion under How To Report OID, earlier. Filing 2012 tax returns Your basis in the debt instrument is increased by the OID you include in income. Filing 2012 tax returns Form 1099-OID. Filing 2012 tax returns   You should receive a Form 1099-OID showing OID for the part of the year you held the debt instrument. Filing 2012 tax returns However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. Filing 2012 tax returns See Reduction for acquisition premium, later. Filing 2012 tax returns If you held an OID debt instrument in a calendar year but did not receive a Form 1099-OID, see Form 1099-OID not received, immediately below, and refer to Section I-A available at www. Filing 2012 tax returns irs. Filing 2012 tax returns gov/pub1212 by clicking the link under Recent Developments. Filing 2012 tax returns Form 1099-OID not received. Filing 2012 tax returns    The OID listed is for each $1,000 of redemption price. Filing 2012 tax returns You must adjust the listed amount if your debt instrument has a different principal amount. Filing 2012 tax returns For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. Filing 2012 tax returns   If you held the debt instrument the entire year, use the OID shown in Section I-A for a calendar year. Filing 2012 tax returns (If your debt instrument is not listed in Section I-A, consult the issuer for information about the issue price and the OID that accrued for that year. Filing 2012 tax returns ) If you did not hold the debt instrument the entire year, figure your OID using the following method. Filing 2012 tax returns Divide the OID shown by 12. Filing 2012 tax returns Multiply the result in (1) by the number of complete and partial months (for example, 6½ months) you held the debt instrument during a calendar year. Filing 2012 tax returns This is the OID to include in income unless you paid an acquisition premium. Filing 2012 tax returns The reduction for acquisition premium is discussed next. Filing 2012 tax returns Reduction for acquisition premium. Filing 2012 tax returns   If you bought the debt instrument at an acquisition premium, figure the OID to include in income as follows. Filing 2012 tax returns Divide the total OID on the debt instrument by the number of complete months, and any part of a month, from the date of original issue to the maturity date. Filing 2012 tax returns This is the monthly OID. Filing 2012 tax returns Subtract from your cost the issue price and the accumulated OID from the date of issue to the date of purchase. Filing 2012 tax returns (If the result is zero or less, stop here. Filing 2012 tax returns You did not pay an acquisition premium. Filing 2012 tax returns ) Divide the amount figured in (2) by the number of complete months, and any part of a month, from the date of your purchase to the maturity date. Filing 2012 tax returns Subtract the amount figured in (3) from the amount figured in (1). Filing 2012 tax returns This is the OID to include in income for each month you hold the debt instrument during the year. Filing 2012 tax returns Transfers during the month. Filing 2012 tax returns   If you buy or sell a debt instrument on any day other than the same day of the month as the date of original issue, the ratable monthly portion of OID for the month of sale is divided between the seller and the buyer according to the number of days each held the debt instrument. Filing 2012 tax returns Your holding period for this purpose begins the day you acquire the debt instrument and ends the day before you dispose of it. Filing 2012 tax returns Debt Instruments Issued After July 1, 1982, and Before 1985 If you hold these debt instruments as capital assets, you must include part of the OID in income each year you own the debt instruments and increase your basis by the amount included. Filing 2012 tax returns For information about showing the correct OID on your tax return, see How To Report OID, earlier. Filing 2012 tax returns Form 1099-OID. Filing 2012 tax returns   You should receive a Form 1099-OID showing OID for the part of the year you held the debt instrument. Filing 2012 tax returns However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. Filing 2012 tax returns See Constant yield method and the discussions on acquisition premium that follow, later. Filing 2012 tax returns If you held an OID debt instrument in a calendar year but did not receive a Form 1099-OID, see Form 1099-OID not received, immediately below, and refer to Section I-A available at www. Filing 2012 tax returns irs. Filing 2012 tax returns gov/pub1212 by clicking the link under Recent Developments. Filing 2012 tax returns Form 1099-OID not received. Filing 2012 tax returns    The OID listed is for each $1,000 of redemption price. Filing 2012 tax returns You must adjust the listed amount if your debt instrument has a different principal amount. Filing 2012 tax returns For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. Filing 2012 tax returns   If you held the debt instrument the entire year, use the OID shown in Section I-A. Filing 2012 tax returns (If your instrument is not listed in Section I-A, consult the issuer for information about the issue price, the yield to maturity, and the OID that accrued for that year. Filing 2012 tax returns ) If you did not hold the debt instrument the entire year, figure your OID using either of the following methods. Filing 2012 tax returns Method 1. Filing 2012 tax returns    Divide the total OID for a calendar year by 365 (366 for leap years). Filing 2012 tax returns Multiply the result in (1) by the number of days you held the debt instrument during that particular year. Filing 2012 tax returns  This computation is an approximation and may result in a slightly higher OID than Method 2. Filing 2012 tax returns Method 2. Filing 2012 tax returns    Look up the daily OID for the first accrual period you held the debt instrument during a calendar year. Filing 2012 tax returns (See Accrual period under Constant yield method, next. Filing 2012 tax returns ) Multiply the daily OID by the number of days you held the debt instrument during that accrual period. Filing 2012 tax returns If you held the debt instrument for part of both accrual periods, repeat (1) and (2) for the second accrual period. Filing 2012 tax returns Add the results of (2) and (3). Filing 2012 tax returns This is the OID to include in income, unless you paid an acquisition premium. Filing 2012 tax returns (The reduction for acquisition premium is discussed later. Filing 2012 tax returns ) Constant yield method. Filing 2012 tax returns   This discussion shows how to figure OID on debt instruments issued after July 1, 1982, and before 1985, using a constant yield method. Filing 2012 tax returns OID is allocated over the life of the debt instrument through adjustments to the issue price for each accrual period. Filing 2012 tax returns   Figure the OID allocable to any accrual period as follows. Filing 2012 tax returns Multiply the adjusted issue price at the beginning of the accrual period by the debt instrument's yield to maturity. Filing 2012 tax returns Subtract from the result in (1) any qualified stated interest allocable to the accrual period. Filing 2012 tax returns Accrual period. Filing 2012 tax returns   An accrual period for any OID debt instrument issued after July 1, 1982, and before 1985 is each 1-year period beginning on the date of the issue of the obligation and each anniversary thereafter, or the shorter period to maturity for the last accrual period. Filing 2012 tax returns Your tax year will usually include parts of two accrual periods. Filing 2012 tax returns Daily OID. Filing 2012 tax returns   The OID for any accrual period is allocated equally to each day in the accrual period. Filing 2012 tax returns You must include in income the sum of the OID amounts for each day you hold the debt instrument during the year. Filing 2012 tax returns If your tax year includes parts of two or more accrual periods, you must include the proper daily OID amounts for each accrual period. Filing 2012 tax returns Figuring daily OID. Filing 2012 tax returns   The daily OID for the initial accrual period is figured using the following formula. Filing 2012 tax returns   (ip × ytm) − qsi     p   ip = issue price ytm = yield to maturity qsi = qualified stated interest p = number of days in accrual period         The daily OID for subsequent accrual periods is figured the same way except the adjusted issue price at the beginning of each period is used in the formula instead of the issue price. Filing 2012 tax returns Reduction for acquisition premium on debt instruments purchased before July 19, 1984. Filing 2012 tax returns   If you bought the debt instrument at an acquisition premium before July 19, 1984, figure the OID includible in income by reducing the daily OID by the daily acquisition premium. Filing 2012 tax returns Figure the daily acquisition premium by dividing the total acquisition premium by the number of days in the period beginning on your purchase date and ending on the day before the date of maturity. Filing 2012 tax returns Reduction for acquisition premium on debt instruments purchased after July 18, 1984. Filing 2012 tax returns   If you bought the debt instrument at an acquisition premium after July 18, 1984, figure the OID includible in income by reducing the daily OID by the daily acquisition premium. Filing 2012 tax returns However, the method of figuring the daily acquisition premium is different from the method described in the preceding discussion. Filing 2012 tax returns To figure the daily acquisition premium under this method, multiply the daily OID by the following fraction. Filing 2012 tax returns The numerator is the acquisition premium. Filing 2012 tax returns The denominator is the total OID remaining for the debt instrument after your purchase date. Filing 2012 tax returns Section I-A is available at www. Filing 2012 tax returns irs. Filing 2012 tax returns gov/pub1212 and clicking the link under Recent Developments. Filing 2012 tax returns Using Section I-A to figure accumulated OID. Filing 2012 tax returns   If you bought your corporate debt instrument in a calendar year or the subsequent year, you can figure the accumulated OID to the date of purchase by adding the following amounts. Filing 2012 tax returns The amount from the “Total OID to January 1, YYYY” column for your debt instrument. Filing 2012 tax returns The OID from January 1 of a calendar year to the date of purchase, figured as follows. Filing 2012 tax returns Multiply the daily OID for the first accrual period in the calendar year by the number of days from January 1 to the date of purchase, or the end of the accrual period if the debt instrument was purchased in the second or third accrual period. Filing 2012 tax returns Multiply the daily OID for each subsequent accrual period by the number of days in the period to the date of purchase or the end of the accrual period, whichever applies. Filing 2012 tax returns Add the amounts figured in (2a) and (2b). Filing 2012 tax returns Debt Instruments Issued After 1984 If you hold debt instruments issued after 1984, you must report part of the OID in gross income each year that you own the debt instruments. Filing 2012 tax returns You must include the OID in gross income whether or not you hold the debt instrument as a capital asset. Filing 2012 tax returns Your basis in the debt instrument is increased by the OID you include in income. Filing 2012 tax returns For information about showing the correct OID on your tax return, see How To Report OID, earlier. Filing 2012 tax returns Form 1099-OID. Filing 2012 tax returns   You should receive a Form 1099-OID showing OID for the part of a calendar year you held the debt instrument. Filing 2012 tax returns However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. Filing 2012 tax returns See Constant yield method and Reduction for acquisition premium, later. Filing 2012 tax returns   You may also need to refigure the OID for a contingent payment or inflation-indexed debt instrument on which the amount reported on Form 1099-OID is inaccurate. Filing 2012 tax returns See Contingent Payment Debt Instruments or Inflation-Indexed Debt Instruments, later. Filing 2012 tax returns If you held an OID debt instrument in a calendar year but did not receive a Form 1099-OID, see Form 1099-OID not received, immediately below, and refer to Section I-B available at www. Filing 2012 tax returns irs. Filing 2012 tax returns gov/pub1212 by clicking the link under Recent Developments. Filing 2012 tax returns Form 1099-OID not received. Filing 2012 tax returns   The OID listed is for each $1,000 of redemption price. Filing 2012 tax returns You must adjust the listed amount if your debt instrument has a different principal amount. Filing 2012 tax returns For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. Filing 2012 tax returns   Use the OID shown in Section I-B for a calendar year if you held the debt instrument the entire year. Filing 2012 tax returns (If your debt instrument is not listed in Section I-B, consult the issuer for information about the issue price, the yield to maturity, and the OID that accrued for that year. Filing 2012 tax returns ) If you did not hold the debt instrument the entire year, figure your OID as follows. Filing 2012 tax returns Look up the daily OID for the first accrual period in which you held the debt instrument during a calendar year. Filing 2012 tax returns (See Accrual period under Constant yield method, later. Filing 2012 tax returns ) Multiply the daily OID by the number of days you held the debt instrument during that accrual period. Filing 2012 tax returns Repeat (1) and (2) for any remaining accrual periods in which you held the debt instrument. Filing 2012 tax returns Add the results of (2) and (3). Filing 2012 tax returns This is the OID to include in income for that year, unless you paid an acquisition premium. Filing 2012 tax returns (The reduction for acquisition premium is discussed later. Filing 2012 tax returns ) Tax-exempt bond. Filing 2012 tax returns   If you own a tax-exempt bond, figure your basis in the bond by adding to your cost the OID you would have included in income if the bond had been taxable. Filing 2012 tax returns You need to make this adjustment to determine if you have a gain or loss on a later disposition of the bond. Filing 2012 tax returns In general, use the rules that follow to determine your OID. Filing 2012 tax returns Constant yield method. Filing 2012 tax returns   This discussion shows how to figure OID on debt instruments issued after 1984 using a constant yield method. Filing 2012 tax returns (The special rules that apply to contingent payment debt instruments and inflation-indexed debt instruments are explained later. Filing 2012 tax returns ) OID is allocated over the life of the debt instrument through adjustments to the issue price for each accrual period. Filing 2012 tax returns   Figure the OID allocable to any accrual period as follows. Filing 2012 tax returns Multiply the adjusted issue price at the beginning of the accrual period by a fraction. Filing 2012 tax returns The numerator of the fraction is the debt instrument's yield to maturity and the denominator is the number of accrual periods per year. Filing 2012 tax returns The yield must be stated appropriately taking into account the length of the particular accrual period. Filing 2012 tax returns Subtract from the result in (1) any qualified stated interest allocable to the accrual period. Filing 2012 tax returns Accrual period. Filing 2012 tax returns   For debt instruments issued after 1984 and before April 4, 1994, an accrual period is each 6-month period that ends on the day that corresponds to the stated maturity date of the debt instrument or the date 6 months before that date. Filing 2012 tax returns For example, a debt instrument maturing on March 31 has accrual periods that end on September 30 and March 31 of each calendar year. Filing 2012 tax returns Any short period is included as the first accrual period. Filing 2012 tax returns   For debt instruments issued after April 3, 1994, accrual periods may be of any length and may vary in length over the term of the debt instrument, as long as each accrual period is no longer than 1 year and all payments are made on the first or last day of an accrual period. Filing 2012 tax returns However, the OID listed for these debt instruments in Section I-B has been figured using 6-month accrual periods. Filing 2012 tax returns Daily OID. Filing 2012 tax returns   The OID for any accrual period is allocated equally to each day in the accrual period. Filing 2012 tax returns Figure the amount to include in income by adding the OID for each day you hold the debt instrument during the year. Filing 2012 tax returns Since your tax year will usually include parts of two or more accrual periods, you must include the proper daily OID for each accrual period. Filing 2012 tax returns If your debt instrument has 6-month accrual periods, your tax year will usually include one full 6-month accrual period and parts of two other 6-month periods. Filing 2012 tax returns Figuring daily OID. Filing 2012 tax returns   The daily OID for the initial accrual period is figured using the following formula. Filing 2012 tax returns   (ip × ytm/n) − qsi     p   ip = issue price ytm = yield to maturity n = number of accrual periods in 1 year qsi = qualified stated interest p = number of days in accrual period       The daily OID for subsequent accrual periods is figured the same way except the adjusted issue price at the beginning of each period is used in the formula instead of the issue price. Filing 2012 tax returns Example 5. Filing 2012 tax returns On January 1 of Year 1, you bought a 15-year, 10% debt instrument of A Corporation at original issue for $86,235. Filing 2012 tax returns 17. Filing 2012 tax returns According to the prospectus, the debt instrument matures on December 31 of Year 15 at a stated redemption price of $100,000. Filing 2012 tax returns The yield to maturity is 12%, compounded semiannually. Filing 2012 tax returns The debt instrument provides for qualified stated interest payments of $5,000 on June 30 and December 31 of each calendar year. Filing 2012 tax returns The accrual periods are the 6-month periods ending on each of these dates. Filing 2012 tax returns The number of days for the first accrual period (January 1 through June 30) is 181 days (182 for leap years). Filing 2012 tax returns The daily OID for the first accrual period is figured as follows. Filing 2012 tax returns   ($86,235. Filing 2012 tax returns 17 x . Filing 2012 tax returns 12/2) – $5,000     181 days     = $174. Filing 2012 tax returns 11020 = $. Filing 2012 tax returns 96193   181           The adjusted issue price at the beginning of the second accrual period is the issue price plus the OID previously includible in income ($86,235. Filing 2012 tax returns 17 + $174. Filing 2012 tax returns 11), or $86,409. Filing 2012 tax returns 28. Filing 2012 tax returns The number of days for the second accrual period (July 1 through December 31) is 184 days. Filing 2012 tax returns The daily OID for the second accrual period is figured as follows. Filing 2012 tax returns   ($86,409. Filing 2012 tax returns 28 x . Filing 2012 tax returns 12/2) – $5,000     184 days     = $184. Filing 2012 tax returns 55681 = $1. Filing 2012 tax returns 00303   184 Since the first and second accrual periods coincide exactly with your tax year, you include in income for Year 1 the OID allocable to the first two accrual periods, $174. Filing 2012 tax returns 11 ($. Filing 2012 tax returns 95665 × 182 days) plus $184. Filing 2012 tax returns 56 ($1. Filing 2012 tax returns 00303 × 184 days), or $358. Filing 2012 tax returns 67. Filing 2012 tax returns Add the OID to the $10,000 interest you report on your income tax return for Year 1. Filing 2012 tax returns Example 6. Filing 2012 tax returns Assume the same facts as in Example 5, except that you bought the debt instrument at original issue on May 1 of Year 1, with a maturity date of April 30, Year 16. Filing 2012 tax returns Also, the interest payment dates are October 31 and April 30 of each calendar year. Filing 2012 tax returns The accrual periods are the 6-month periods ending on each of these dates. Filing 2012 tax returns The number of days for the first accrual period (May 1 through October 31) is 184 days. Filing 2012 tax returns The daily OID for the first accrual period is figured as follows. Filing 2012 tax returns   ($86,235. Filing 2012 tax returns 17 x . Filing 2012 tax returns 12/2) – $5,000     184 days     = $174. Filing 2012 tax returns 11020 = $. Filing 2012 tax returns 94625   184           The number of days for the second accrual period (November 1 through April 30) is 181 days (182 for leap years). Filing 2012 tax returns The daily OID for the second accrual period is figured as follows. Filing 2012 tax returns   ($86,409. Filing 2012 tax returns 28 x . Filing 2012 tax returns 12/2) – $5,000     181 days     = $184. Filing 2012 tax returns 55681 = $1. Filing 2012 tax returns 01965   181 If you hold the debt instrument through the end of Year 1, you must include $236. Filing 2012 tax returns 31 of OID in income. Filing 2012 tax returns This is $174. Filing 2012 tax returns 11 ($. Filing 2012 tax returns 94625 × 184 days) for the period May 1 through October 31 plus $62. Filing 2012 tax returns 20 ($1. Filing 2012 tax returns 01965 × 61 days) for the period November 1 through December 31. Filing 2012 tax returns The OID is added to the $5,000 interest income paid on October 31 of Year 1. Filing 2012 tax returns Your basis in the debt instrument is increased by the OID you include in income. Filing 2012 tax returns On January 1 of Year 2, your basis in the A Corporation debt instrument is $86,471. Filing 2012 tax returns 48 ($86,235. Filing 2012 tax returns 17 + $236. Filing 2012 tax returns 31). Filing 2012 tax returns Short first accrual period. Filing 2012 tax returns   You may have to make adjustments if a debt instrument has a short first accrual period. Filing 2012 tax returns For example, a debt instrument with 6-month accrual periods that is issued on February 15 and matures on October 31 has a short first accrual period that ends April 30. Filing 2012 tax returns (The remaining accrual periods begin on May 1 and November 1. Filing 2012 tax returns ) For this short period, figure the daily OID as described earlier, but adjust the yield for the length of the short accrual period. Filing 2012 tax returns You may use any reasonable compounding method in determining OID for a short period. Filing 2012 tax returns Examples of reasonable compounding methods include continuous compounding and monthly compounding (that is, simple interest within a month). Filing 2012 tax returns Consult your tax advisor for more information about making this computation. Filing 2012 tax returns   The OID for the final accrual period is the difference between the amount payable at maturity (other than a payment of qualified stated interest) and the adjusted issue price at the beginning of the final accrual period. Filing 2012 tax returns Reduction for acquisition premium. Filing 2012 tax returns   If you bought the debt instrument at an acquisition premium, figure the OID includible in income by reducing the daily OID by the daily acquisition premium. Filing 2012 tax returns To figure the daily acquisition premium, multiply the daily OID by the following fraction. Filing 2012 tax returns The numerator is the acquisition premium. Filing 2012 tax returns The denominator is the total OID remaining for the debt instrument after your purchase date. Filing 2012 tax returns Example 7. Filing 2012 tax returns Assume the same facts as in Example 6, except that you bought the debt instrument on November 1 of Year 1 for $87,000, after its original issue on May 1 of Year 1. Filing 2012 tax returns The adjusted issue price on November 1 of Year 1 is $86,409. Filing 2012 tax returns 28 ($86,235. Filing 2012 tax returns 17 + $174. Filing 2012 tax returns 11). Filing 2012 tax returns In this case, you paid an acquisition premium of $590. Filing 2012 tax returns 72 ($87,000 − $86,409. Filing 2012 tax returns 28). Filing 2012 tax returns The daily OID for the accrual period November 1 through April 30, reduced for the acquisition premium, is figured as follows. Filing 2012 tax returns 1) Daily OID on date of purchase (2nd accrual period) $1. Filing 2012 tax returns 01965*  2)  Acquisition premium $590. Filing 2012 tax returns 72    3)  Total OID remaining after purchase date ($13,764. Filing 2012 tax returns 83 − $174. Filing 2012 tax returns 11) 13,590. Filing 2012 tax returns 72   4) Line 2 ÷ line 3 . Filing 2012 tax returns 04346  5)  Line 1 × line 4 . Filing 2012 tax returns 04432  6)  Daily OID reduced for the acquisition premium. Filing 2012 tax returns Line 1 − line 5 $0. Filing 2012 tax returns 97533  * As shown in Example 6. Filing 2012 tax returns The total OID to include in income for Year 1 is $59. Filing 2012 tax returns 50 ($. Filing 2012 tax returns 97533 × 61 days). Filing 2012 tax returns Contingent Payment Debt Instruments This discussion shows how to figure OID on a contingent payment debt instrument issued after August 12, 1996, that was issued for cash or publicly traded property. Filing 2012 tax returns In general, a contingent payment debt instrument provides for one or more payments that are contingent as to timing or amount. Filing 2012 tax returns If you hold a contingent payment bond, you must report OID as it accrues each year. Filing 2012 tax returns Because the actual payments on a contingent payment debt instrument cannot be known in advance, issuers and holders cannot use the constant yield method (discussed earlier under Debt Instruments Issued After 1984) without making certain assumptions about the payments on the debt instrument. Filing 2012 tax returns To figure OID accruals on contingent payment debt instruments, holders and issuers must use the noncontingent bond method. Filing 2012 tax returns Noncontingent bond method. Filing 2012 tax returns    Under this method, the issuer must compute a comparable yield for the debt instrument and, based on this yield, construct a projected payment schedule for the instrument, which includes a projected fixed amount for each contingent payment. Filing 2012 tax returns In general, holders and issuers accrue OID on this projected payment schedule using the constant yield method that applies to fixed payment debt instruments. Filing 2012 tax returns When a contingent payment differs from the projected fixed amount, the holders and issuers make adjustments to their OID accruals. Filing 2012 tax returns If the actual contingent payment is larger than expected, both the issuer and the holder increase their OID accruals. Filing 2012 tax returns If the actual contingent payment is smaller than expected, holders and issuers generally decrease their OID accruals. Filing 2012 tax returns Form 1099-OID. Filing 2012 tax returns   The amount shown on Form 1099-OID in box 1 you receive for a contingent payment debt instrument may not be the correct amount to include in income. Filing 2012 tax returns For example, the amount may not be correct if the contingent payment was different from the projected amount. Filing 2012 tax returns If the amount in box 1 is not correct, you must figure the OID to report on your return under the following rules. Filing 2012 tax returns For information on showing an OID adjustment on your tax return, see How To Report OID, earlier. Filing 2012 tax returns Figuring OID. Filing 2012 tax returns   To figure OID on a contingent payment debt instrument, you need to know the “comparable yield” and “projected payment schedule” of the debt instrument. Filing 2012 tax returns The issuer must make these available to you. Filing 2012 tax returns Comparable yield. Filing 2012 tax returns   The comparable yield generally is the yield at which the issuer would issue a fixed rate debt instrument with terms and conditions similar to those of the contingent payment debt instrument. Filing 2012 tax returns The comparable yield is determined as of the debt instrument's issue date. Filing 2012 tax returns Projected payment schedule. Filing 2012 tax returns   The projected payment schedule for a contingent payment debt instrument includes all fixed payments due under the instrument and a projected fixed amount for each contingent payment. Filing 2012 tax returns The projected payment schedule is created by the issuer as of the debt instrument's issue date. Filing 2012 tax returns It is used to determine the issuer's and holder's interest accruals and adjustments. Filing 2012 tax returns Steps for figuring OID. Filing 2012 tax returns   Figure the OID on a contingent payment debt instrument in two steps. Filing 2012 tax returns Figure the OID using the constant yield method (discussed earlier under Debt Instruments Issued After 1984 ) that applies to fixed payment debt instruments. Filing 2012 tax returns Use the comparable yield as the yield to maturity. Filing 2012 tax returns In general, use the projected payment schedule to determine the instrument's adjusted issue price at the beginning of each accrual period (other than the initial period). Filing 2012 tax returns Do not treat any amount payable as qualified stated interest. Filing 2012 tax returns Adjust the OID in (1) to account for actual contingent payments. Filing 2012 tax returns If the contingent payment is greater than the projected fixed amount, you have a positive adjustment. Filing 2012 tax returns If the contingent payment is less than the projected fixed amount, you have a negative adjustment. Filing 2012 tax returns Net positive adjustment. Filing 2012 tax returns   A net positive adjustment exists for a tax year when the total of any positive adjustments described in (2) above for the tax year is more than the total of any negative adjustments for the tax year. Filing 2012 tax returns Treat a net positive adjustment as additional OID for the tax year. Filing 2012 tax returns Net negative adjustment. Filing 2012 tax returns   A net negative adjustment exists for a tax year when the total of any negative adjustments described in (2) above for the tax year is more than the total of any positive adjustments for the tax year. Filing 2012 tax returns Use a net negative adjustment to offset OID on the debt instrument for the tax year. Filing 2012 tax returns If the net negative adjustment is more than the OID on the debt instrument for the tax year, you can claim the difference as an ordinary loss. Filing 2012 tax returns However, the amount you can claim as an ordinary loss is limited to the OID on the debt instrument you included in income in prior tax years. Filing 2012 tax returns You must carry forward any net negative adjustment that is more than the total OID for the tax year and prior tax years and treat it as a negative adjustment in the next tax year. Filing 2012 tax returns Basis adjustments. Filing 2012 tax returns   In general, increase your basis in a contingent payment debt instrument by the OID included in income. Filing 2012 tax returns Your basis, however, is not affected by any negative or positive adjustments. Filing 2012 tax returns Decrease your basis by any noncontingent payment received and the projected contingent payment scheduled to be received. Filing 2012 tax returns Treatment of gain or loss on sale or exchange. Filing 2012 tax returns   If you sell a contingent payment debt instrument at a gain, your gain is ordinary income (interest income), even if you hold the debt instrument as a capital asset. Filing 2012 tax returns If you sell a contingent payment debt instrument at a loss, your loss is an ordinary loss to the extent of your prior OID accruals on the debt instrument. Filing 2012 tax returns If the debt instrument is a capital asset, treat any loss that is more than your prior OID accruals as a capital loss. Filing 2012 tax returns See Regulations section 1. Filing 2012 tax returns 1275-4 for exceptions to these rules. Filing 2012 tax returns Premium, acquisition premium, and market discount. Filing 2012 tax returns   The rules for accruing premium, acquisition premium, and market discount do not apply to a contingent payment debt instrument. Filing 2012 tax returns See Regulations section 1. Filing 2012 tax returns 1275-4 to determine how to account for these items. Filing 2012 tax returns Inflation-Indexed Debt Instruments This discussion shows how you figure OID on certain inflation-indexed debt instruments issued after January 5, 1997. Filing 2012 tax returns An inflation-indexed debt instrument is generally a debt instrument on which the payments are adjusted for inflation and d
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Consumer Protection Offices

City, county, regional, and state consumer offices offer a variety of important services. They might mediate complaints, conduct investigations, prosecute offenders of consumer laws, license and regulate professional service providers, provide educational materials and advocate for consumer rights. To save time, call before sending a written complaint. Ask if the office handles the type of complaint you have and if complaint forms are provided.

State Consumer Protection Offices

Virginia Office of the Attorney General

Website: Virginia Office of the Attorney General

Address: Virginia Office of the Attorney General
Consumer Protection Section
900 E. Main St.
Richmond, VA 23219

Phone Number: 804-786-2042

Toll-free: 1-800-552-9963 (VA)

TTY: 1-800-828-1120

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Regional Consumer Protection Offices

Office of the Attorney General- Northern Virginia

Website: Office of the Attorney General- Northern Virginia

Address: Office of the Attorney General- Northern Virginia
10555 Main St., Suite 350
Fairfax, VA 22030

Phone Number: 703-277-3540

Office of the Attorney General- Southwest Region

Website: Office of the Attorney General- Southwest Region

Address: Office of the Attorney General- Southwest Region
204 Abingdon Place
Abingdon, VA 24211

Phone Number: 276-628-2759

Office of the Attorney General- Western Region

Website: Office of the Attorney General- Western Region

Address: Office of the Attorney General- Western Region
3033 Peters Creek Rd.
Roanoke, VA 24019

Phone Number: 540-562-3570

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County Consumer Protection Offices

Fairfax County Department of Cable Communications and Consumer Protection

Website: Fairfax County Department of Cable Communications and Consumer Protection

Address: Fairfax County Department of Cable Communications and Consumer Protection
12000 Government Center Pkwy., Suite 433
Fairfax, VA 22035

Phone Number: 703-222-8435

TTY: 711

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Banking Authorities

The officials listed in this section regulate and supervise state-chartered banks. Many of them handle or refer problems and complaints about other types of financial institutions as well. Some also answer general questions about banking and consumer credit. If you are dealing with a federally chartered bank, check Federal Agencies.

State Corporation Commission

Website: State Corporation Commission

Address: State Corporation Commission
Bureau of Financial Institutions
PO Box 640
Richmond, VA 23218

Phone Number: 804-371-9657

Toll-free: 1-800-552-7945 (VA)

TTY: 804-371-9206

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Insurance Regulators

Each state has its own laws and regulations for each type of insurance. The officials listed in this section enforce these laws. Many of these offices can also provide you with information to help you make informed insurance buying decisions.

State Corporation Commission

Website: State Corporation Commission

Address: State Corporation Commission
Bureau of Insurance
PO Box 1157
Richmond, VA 23218-1157

Phone Number: 804-371-9741

Toll-free: 1-877-310-6560

TTY: 804-371-9206

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Securities Administrators

Each state has its own laws and regulations for securities brokers and securities - including stocks, mutual funds, commodities, real estate, etc. The officials and agencies listed in this section enforce these laws and regulations. Many of these offices can also provide information to help you make informed investment decisions.

State Corporation Commission

Website: State Corporation Commission

Address: State Corporation Commission
Division of Securities and Retail Franchising
PO Box 1197
Richmond, VA 23218

Phone Number: 804-371-9051

Toll-free: 1-800-552-7945 (VA)

TTY: 804-371-9206

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Utility Commissions

State Utility Commissions regulate services and rates for gas, electricity and telephones within your state. In some states, the utility commissions regulate other services such as water, transportation, and the moving of household goods. Many utility commissions handle consumer complaints. Sometimes, if a number of complaints are received about the same utility matter, they will conduct investigations.

State Corporation Commission

Website: State Corporation Commission

Address: State Corporation Commission
Division of Energy Regulation
PO Box 1197
Richmond, VA 23218

Phone Number: 804-371-9611

Toll-free: 1-800-552-7945 (VA)

TTY: 804-371-9206

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The Filing 2012 Tax Returns

Filing 2012 tax returns Publication 560 - Introductory Material Table of Contents Future Developments What's New Reminders IntroductionSEP plans. Filing 2012 tax returns SIMPLE plans. Filing 2012 tax returns Qualified plans. Filing 2012 tax returns Ordering forms and publications. Filing 2012 tax returns Tax questions. Filing 2012 tax returns Future Developments For the latest information about developments related to Publication 560, such as legislation enacted after we release it, go to www. Filing 2012 tax returns irs. Filing 2012 tax returns gov/pub560. Filing 2012 tax returns What's New Compensation limit increased for 2013 and 2014. Filing 2012 tax returns  For 2013 the maximum compensation used for figuring contributions and benefits increases to $255,000. Filing 2012 tax returns This limit increases to $260,000 for 2014. Filing 2012 tax returns Elective deferral limit for 2013 and 2014. Filing 2012 tax returns  The limit on elective deferrals, other than catch-up contributions, increases to $17,500 for 2013 and remains at $17,500 for 2014. Filing 2012 tax returns These limits apply for participants in SARSEPs, 401(k) plans (excluding SIMPLE plans), section 403(b) plans and section 457(b) plans. Filing 2012 tax returns Defined contribution limit increased for 2013 and 2014. Filing 2012 tax returns  The limit on contributions, other than catch-up contributions, for a participant in a defined contribution plan increases to $51,000 for 2013. Filing 2012 tax returns This limit increases to $52,000 for 2014. Filing 2012 tax returns SIMPLE plan salary reduction contribution limit for 2013 and 2014. Filing 2012 tax returns  The limit on salary reduction contributions, other than catch-up contributions, increases to $12,000 for 2013 and remains at $12,000 for 2014. Filing 2012 tax returns Catch-up contribution limit remains unchanged for 2013 and 2014. Filing 2012 tax returns  A plan can permit participants who are age 50 or over at the end of the calendar year to make catch-up contributions in addition to elective deferrals and SIMPLE plan salary reduction contributions. Filing 2012 tax returns The catch-up contribution limitation for defined contribution plans other than SIMPLE plans remains unchanged at $5,500 for 2013 and 2014. Filing 2012 tax returns The catch-up contribution limitation for SIMPLE plans remains unchanged at $2,500 for 2013 and 2014. Filing 2012 tax returns The catch-up contributions a participant can make for a year cannot exceed the lesser of the following amounts. Filing 2012 tax returns The catch-up contribution limit. Filing 2012 tax returns The excess of the participant's compensation over the elective deferrals that are not catch-up contributions. Filing 2012 tax returns See “Catch-up contributions” under Contribution Limits and Limit on Elective Deferrals in chapters 3 and 4, respectively, for more information. Filing 2012 tax returns All section references are to the Internal Revenue Code, unless otherwise stated. Filing 2012 tax returns Reminders In-plan Roth rollovers. Filing 2012 tax returns  Section 402A(c)(4) provides for a distribution from an individual's account in a 401(k) plan, other than from a designated Roth account, that is rolled over to the individual's designated Roth account in the same plan. Filing 2012 tax returns An in-plan Roth rollover is not treated as a distribution for most purposes. Filing 2012 tax returns Section 402A(c)(4) was added by the Small Business Jobs Act of 2010 and applies to distributions made after September 27, 2010. Filing 2012 tax returns For additional guidance on in-plan Roth rollovers, see Notice 2010-84, 2010-51 I. Filing 2012 tax returns R. Filing 2012 tax returns B. Filing 2012 tax returns 872, available at  www. Filing 2012 tax returns irs. Filing 2012 tax returns gov/irb/2010-51_IRB/ar11. Filing 2012 tax returns html. Filing 2012 tax returns In-plan Roth rollovers expanded. Filing 2012 tax returns  Beginning in 2013, a plan with designated Roth accounts can permit a participant to roll over amounts into a designated Roth account from his or her other accounts in the same plan, regardless of whether the participant is eligible for a distribution from the other accounts. Filing 2012 tax returns Section 402A(c)(4) was amended by the American Taxpayer Relief Act of 2012. Filing 2012 tax returns For more information, see Notice 2013-74, 2013-52 I. Filing 2012 tax returns R. Filing 2012 tax returns B. Filing 2012 tax returns 819, available at www. Filing 2012 tax returns irs. Filing 2012 tax returns gov/irb/2013-52_IRB/ar11. Filing 2012 tax returns html. Filing 2012 tax returns Credit for startup costs. Filing 2012 tax returns  You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SEP, SIMPLE, or qualified plan. Filing 2012 tax returns The credit equals 50% of the cost to set up and administer the plan and educate employees about the plan, up to a maximum of $500 per year for each of the first 3 years of the plan. Filing 2012 tax returns You can choose to start claiming the credit in the tax year before the tax year in which the plan becomes effective. Filing 2012 tax returns You must have had 100 or fewer employees who received at least $5,000 in compensation from you for the preceding year. Filing 2012 tax returns At least one participant must be a non-highly compensated employee. Filing 2012 tax returns The employees generally cannot be substantially the same employees for whom contributions were made or benefits accrued under a plan of any of the following employers in the 3-tax-year period immediately before the first year to which the credit applies. Filing 2012 tax returns You. Filing 2012 tax returns A member of a controlled group that includes you. Filing 2012 tax returns A predecessor of (1) or (2). Filing 2012 tax returns The credit is part of the general business credit, which can be carried back or forward to other tax years if it cannot be used in the current year. Filing 2012 tax returns However, the part of the general business credit attributable to the small employer pension plan startup cost credit cannot be carried back to a tax year beginning before January 1, 2002. Filing 2012 tax returns You cannot deduct the part of the startup costs equal to the credit claimed for a tax year, but you can choose not to claim the allowable credit for a tax year. Filing 2012 tax returns To take the credit, use Form 8881, Credit for Small Employer Pension Plan Startup Costs. Filing 2012 tax returns Retirement savings contributions credit. Filing 2012 tax returns  Retirement plan participants (including self-employed individuals) who make contributions to their plan may qualify for the retirement savings contribution credit. Filing 2012 tax returns The maximum contribution eligible for the credit is $2,000. Filing 2012 tax returns To take the credit, use Form 8880, Credit for Qualified Retirement Savings Contributions. Filing 2012 tax returns For more information on who is eligible for the credit, retirement plan contributions eligible for the credit and how to figure the credit, see Form 8880 and its instructions or go to the IRS website and search Retirement Topics-Retirement Savings Contributions Credit (Saver's Credit). Filing 2012 tax returns Photographs of missing children. Filing 2012 tax returns  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Filing 2012 tax returns Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Filing 2012 tax returns You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Filing 2012 tax returns Introduction This publication discusses retirement plans you can set up and maintain for yourself and your employees. Filing 2012 tax returns In this publication, “you” refers to the employer. Filing 2012 tax returns See chapter 1 for the definition of the term employer and the definitions of other terms used in this publication. Filing 2012 tax returns This publication covers the following types of retirement plans. Filing 2012 tax returns SEP (simplified employee pension) plans. Filing 2012 tax returns SIMPLE (savings incentive match plan for employees) plans. Filing 2012 tax returns Qualified plans (also called H. Filing 2012 tax returns R. Filing 2012 tax returns 10 plans or Keogh plans when covering self-employed individuals), including 401(k) plans. Filing 2012 tax returns SEP, SIMPLE, and qualified plans offer you and your employees a tax-favored way to save for retirement. Filing 2012 tax returns You can deduct contributions you make to the plan for your employees. Filing 2012 tax returns If you are a sole proprietor, you can deduct contributions you make to the plan for yourself. Filing 2012 tax returns You can also deduct trustees' fees if contributions to the plan do not cover them. Filing 2012 tax returns Earnings on the contributions are generally tax free until you or your employees receive distributions from the plan. Filing 2012 tax returns Under a 401(k) plan, employees can have you contribute limited amounts of their before-tax (after-tax, in the case of a qualified Roth contribution program) pay to the plan. Filing 2012 tax returns These amounts (and the earnings on them) are generally tax free until your employees receive distributions from the plan or, in the case of a qualified distribution from a designated Roth account, completely tax free. Filing 2012 tax returns What this publication covers. Filing 2012 tax returns   This publication contains the information you need to understand the following topics. Filing 2012 tax returns What type of plan to set up. Filing 2012 tax returns How to set up a plan. Filing 2012 tax returns How much you can contribute to a plan. Filing 2012 tax returns How much of your contribution is deductible. Filing 2012 tax returns How to treat certain distributions. Filing 2012 tax returns How to report information about the plan to the IRS and your employees. Filing 2012 tax returns Basic features of SEP, SIMPLE, and qualified plans. Filing 2012 tax returns The key rules for SEP, SIMPLE, and qualified plans are outlined in Table 1. Filing 2012 tax returns SEP plans. Filing 2012 tax returns   SEPs provide a simplified method for you to make contributions to a retirement plan for yourself and your employees. Filing 2012 tax returns Instead of setting up a profit-sharing or money purchase plan with a trust, you can adopt a SEP agreement and make contributions directly to a traditional individual retirement account or a traditional individual retirement annuity (SEP-IRA) set up for yourself and each eligible employee. Filing 2012 tax returns SIMPLE plans. Filing 2012 tax returns   Generally, if you had 100 or fewer employees who received at least $5,000 in compensation last year, you can set up a SIMPLE plan. Filing 2012 tax returns Under a SIMPLE plan, employees can choose to make salary reduction contributions rather than receiving these amounts as part of their regular pay. Filing 2012 tax returns In addition, you will contribute matching or nonelective contributions. Filing 2012 tax returns The two types of SIMPLE plans are the SIMPLE IRA plan and the SIMPLE 401(k) plan. Filing 2012 tax returns Qualified plans. Filing 2012 tax returns   The qualified plan rules are more complex than the SEP plan and SIMPLE plan rules. Filing 2012 tax returns However, there are advantages to qualified plans, such as increased flexibility in designing plans and increased contribution and deduction limits in some cases. Filing 2012 tax returns Table 1. Filing 2012 tax returns Key Retirement Plan Rules for 2013 Type  of  Plan Last Date for Contribution Maximum Contribution Maximum Deduction When To Set Up Plan SEP Due date of employer's return (including extensions). Filing 2012 tax returns Smaller of $51,000 or 25%1 of participant's compensation. Filing 2012 tax returns 2 25%1 of all participants' compensation. Filing 2012 tax returns 2 Any time up to the due date of employer's return (including extensions). Filing 2012 tax returns SIMPLE IRA and SIMPLE 401(k) Salary reduction contributions: 30 days after the end of the month for which the contributions are to be made. Filing 2012 tax returns 4  Matching or nonelective contributions: Due date of employer's return (including extensions). Filing 2012 tax returns Employee contribution: Salary reduction contribution up to $12,000, $14,500 if age 50 or over. Filing 2012 tax returns   Employer contribution:  Either dollar-for-dollar matching contributions, up to 3% of employee's compensation,3 or fixed nonelective contributions of 2% of compensation. Filing 2012 tax returns 2 Same as maximum contribution. Filing 2012 tax returns Any time between 1/1 and 10/1 of the calendar year. Filing 2012 tax returns   For a new employer coming into existence after 10/1, as soon as administratively feasible. Filing 2012 tax returns Qualified Plan: Defined Contribution Plan  Elective deferral: Due date of employer's return (including extensions). Filing 2012 tax returns 4   Employer contribution: Money Purchase or Profit-Sharing: Due date of employer's return (including extensions). Filing 2012 tax returns  Employee contribution: Elective deferral up to $17,500, $23,000 if age 50 or over. Filing 2012 tax returns   Employer contribution: Money Purchase: Smaller of $51,000 or 100%1 of participant's compensation. Filing 2012 tax returns 2  Profit-Sharing: Smaller of $51,000 or 100%1 of participant's compensation. Filing 2012 tax returns 2  25%1 of all participants' compensation2, plus amount of elective deferrals made. Filing 2012 tax returns   By the end of the tax year. Filing 2012 tax returns Qualified Plan: Defined Benefit Plan Contributions generally must be paid in quarterly installments, due 15 days after the end of each quarter. Filing 2012 tax returns See Minimum Funding Requirement in chapter 4. Filing 2012 tax returns Amount needed to provide an annual benefit no larger than the smaller of $205,000 or 100% of the participant's average compensation for his or her highest 3 consecutive calendar years. Filing 2012 tax returns Based on actuarial assumptions and computations. Filing 2012 tax returns By the end of the tax year. Filing 2012 tax returns 1Net earnings from self-employment must take the contribution into account. Filing 2012 tax returns See Deduction Limit for Self-Employed Individuals in chapters 2 and 4 . Filing 2012 tax returns  2Compensation is generally limited to $255,000 in 2013. Filing 2012 tax returns  3Under a SIMPLE 401(k) plan, compensation is generally limited to $255,000 in 2013. Filing 2012 tax returns  4Certain plans subject to Department of Labor rules may have an earlier due date for salary reduction contributions and elective deferrals. Filing 2012 tax returns What this publication does not cover. Filing 2012 tax returns   Although the purpose of this publication is to provide general information about retirement plans you can set up for your employees, it does not contain all the rules and exceptions that apply to these plans. Filing 2012 tax returns You may also need professional help and guidance. Filing 2012 tax returns   Also, this publication does not cover all the rules that may be of interest to employees. Filing 2012 tax returns For example, it does not cover the following topics. Filing 2012 tax returns The comprehensive IRA rules an employee needs to know. Filing 2012 tax returns These rules are covered in Publication 590, Individual Retirement Arrangements (IRAs). Filing 2012 tax returns The comprehensive rules that apply to distributions from retirement plans. Filing 2012 tax returns These rules are covered in Publication 575, Pension and Annuity Income. Filing 2012 tax returns The comprehensive rules that apply to section 403(b) plans. Filing 2012 tax returns These rules are covered in Publication 571, Tax-Sheltered Annuity Plans (403(b) Plans). Filing 2012 tax returns Comments and suggestions. Filing 2012 tax returns   We welcome your comments about this publication and your suggestions for future editions. Filing 2012 tax returns   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Filing 2012 tax returns NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Filing 2012 tax returns Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Filing 2012 tax returns   You can send your comments from www. Filing 2012 tax returns irs. Filing 2012 tax returns gov/formspubs. Filing 2012 tax returns Click on “More Information” and then on “Give us feedback. Filing 2012 tax returns ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Filing 2012 tax returns Ordering forms and publications. Filing 2012 tax returns   Visit www. Filing 2012 tax returns irs. 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