What is Original Issue Discount (OID) and why is it reported on my Form 1099?
OID bonds are generally issued at a low or zero coupon and are issued at a discount relative to the bond’s par value. The difference between the discounted purchase price and the value at maturity is the return or yield on the bond and is called accretion. A bond’s accretion must be calculated annually and this amount must be reported to the IRS as income on your Form 1099. You are required to report OID each year on your tax return as it accrues whether or not you receive any payments for this. More information about OID can be found on the IRS website in IRS Publication 1212. If you earn OID you should consult your tax advisor.
