Form 1099-OID: Original Issue Discount
Report original issue discount
Department of the Treasury — Internal Revenue Service
Payer's Name: [Payer Name] TIN: [Payer TIN]
Payer's Address: [Payer Address] Phone: [Payer Phone]
Recipient's Name: [Recipient Name] TIN: [Recipient TIN]
Recipient's Address: [Recipient Address] Account Number: [Account Number]
Tax Year: [Tax Year]
Original Issue Discount: [Original Issue Discount]
Other Periodic Interest: [Other Periodic Interest]
Early Withdrawal Penalty: [Early Withdrawal Penalty]
Federal Income Tax Withheld: [Federal Income Tax Withheld]
Market Discount: [Market Discount]
Acquisition Premium: [Acquisition Premium]
Party 1
________________
Signature
Date: ________________
Party 2
________________
Signature
Date: ________________
What Is a Form 1099-OID: Original Issue Discount?
A Form 1099-OID: Original Issue Discount in the United States captures the structured information needed to complete the process it supports.
Original issue discount arises when a debt instrument is issued at a price below its stated redemption price at maturity (face value). The difference between the issue price and the redemption price represents additional interest that accrues over the life of the instrument using the constant yield method prescribed by IRC Section 1272(a). Under this method, OID is computed daily by applying the instrument's yield to maturity to its adjusted issue price, resulting in increasing OID accruals each year for instruments with a maturity greater than one year. This is sometimes called "phantom income" because the holder must report the OID as interest income each year despite not receiving any cash until the instrument matures or is sold.
The OID rules apply to a wide range of debt instruments including zero-coupon bonds (which pay no periodic interest and are issued at a deep discount), Treasury STRIPS (Separate Trading of Registered Interest and Principal of Securities), certain corporate bonds issued below par, and other fixed-income securities. Short-term obligations (those with a maturity of one year or less) follow separate rules under IRC Section 1281, where OID is generally recognized upon disposition rather than daily accrual for cash-method taxpayers, unless they elect to accrue it currently.
When Do You Need a Form 1099-OID: Original Issue Discount?
Form 1099-OID is issued to holders of debt instruments whenever the OID accrued during the year equals $10 or more. The most common scenario involves investors who hold zero-coupon bonds, which are purchased at a substantial discount to face value and pay no periodic interest. The entire return on a zero-coupon bond is OID, and the holder must report the annual OID accrual as interest income even though no cash is received until maturity. Treasury STRIPS, which separate the interest and principal components of Treasury securities, are a widely held zero-coupon instrument generating Form 1099-OID.
Corporate bonds issued at a discount also generate OID that must be reported annually. If a $1,000 face value bond is issued at $950, the $50 discount is OID that accrues over the bond's life using the constant yield method. Certificates of deposit with terms longer than one year that defer interest until maturity may also generate OID. Certain inflation-indexed debt instruments, including TIPS (Treasury Inflation-Protected Securities), report inflation adjustments as OID on Form 1099-OID.
Investors who purchase OID instruments in the secondary market at a premium over the adjusted issue price may need to adjust the OID reported on Form 1099-OID. Under IRC Section 1272(a)(7), a holder who acquires a debt instrument at an acquisition premium reduces the OID includible in income by a fraction reflecting the premium paid. The form reports the total OID for the instrument as if held from issuance, so the holder must compute their own adjustment. Conversely, market discount on previously issued bonds is not OID and is instead governed by IRC Sections 1276-1278, reported separately on Form 1099-INT or recognized upon disposition.
What to Include in Your Form 1099-OID: Original Issue Discount
Form 1099-OID contains several boxes reporting different components of discount income and related information. Box 1 reports the total original issue discount for the calendar year, calculated using the constant yield method under IRC Section 1272(a). This is the amount the holder must include in gross income as interest, reported on Form 1040, Line 2b, and listed on Schedule B if total interest income exceeds $1,500.
Box 2 reports other periodic interest paid on the debt instrument during the year. Many OID instruments also pay stated (coupon) interest in addition to the OID accrual, and Box 2 captures this separately. The sum of Box 1 and Box 2 represents the total interest income from the instrument. Box 3 reports early withdrawal penalties assessed if the holder redeems a CD or similar instrument before maturity, deductible as an adjustment to income on Schedule 1, Line 18.
Box 5 reports market discount, which arises when a holder purchases a previously issued debt instrument at a price below its adjusted issue price. Under IRC Section 1276, accrued market discount is recognized as ordinary income upon disposition of the instrument (or earlier, if the holder elects to accrue it currently). Box 6 reports acquisition premium, which reduces the OID includible in income under IRC Section 1272(a)(7). Box 8 reports OID on U.S. Treasury obligations, which is taxable for federal purposes but exempt from state and local income tax under 31 U.S.C. Section 3124. Box 9 reports investment expenses deductible under IRC Section 212 (subject to the 2% miscellaneous itemized deduction floor, which is currently suspended through 2025 by the TCJA). Box 11 reports tax-exempt OID from municipal obligations, which is excluded from federal income under IRC Section 103 but must be reported because it affects the taxability of Social Security benefits and may be subject to AMT if from private activity bonds.
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Forms Legal. (2026). Form 1099-OID: Original Issue Discount (United States) [Legal document template]. Forms Legal. https://forms-legal.com/usa/government/tax-forms/form-1099-oid
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author = {{Forms Legal}},
title = {Form 1099-OID: Original Issue Discount (United States)},
year = {2026},
howpublished = {\url{https://forms-legal.com/usa/government/tax-forms/form-1099-oid}},
note = {Free legal document template. Based on Internal Revenue Code (26 U.S.C.)}
}Frequently Asked Questions
Form 1099-OID, Original Issue Discount, is an IRS information return that reports original issue discount of $10 or more, which is a form of interest that accrues on certain bonds and debt instruments issued at a discount. The payer or filer sends one copy to the IRS and furnishes another copy to the recipient, who uses the information to report the relevant amounts on their federal tax return. Because the IRS receives its own copy and matches it against the recipient's return, the amounts on the form should be reflected accurately on the recipient's taxes. The form identifies the payer, the recipient, their taxpayer identification numbers, and the reported amounts in numbered boxes. brokers and issuers of debt instruments with original issue discount issue Form 1099-OID. Because the reporting rules and boxes are specific to this form, the filer should confirm which amounts are reportable and the recipient should reconcile the form with their own records before filing their return.
Form 1099-OID is issued by the entity responsible for the reportable transaction, and brokers and issuers of debt instruments with original issue discount issue Form 1099-OID. The payer must furnish the recipient copy by January 31 and file with the IRS by February 28 on paper or March 31 electronically. Payers that file 10 or more information returns in total must file electronically under current IRS rules. Penalties apply for filing late, failing to file, or providing incorrect information, and they increase the longer the form is overdue. Because the deadlines are firm and the electronic filing threshold is low, filers should gather the recipient's correct taxpayer identification number, often using Form W-9, well before the due date. Recipients who do not receive an expected form by the deadline should contact the payer, but they remain responsible for reporting the income or transaction on their return regardless of whether the form arrives on time.
When you receive Form 1099-OID, you should review it for accuracy and use it to report the relevant amounts on your federal tax return, because the IRS receives a matching copy. Original issue discount on Form 1099-OID is generally taxable as interest income each year as it accrues, reported on your Form 1040 and on Schedule B if your total interest exceeds $1,500, even though you may not receive the cash until maturity. Verify that your name, taxpayer identification number, and the reported amounts are correct, and contact the issuer for a corrected form if you find an error, since a mismatch can trigger an IRS notice. Keep the form with your tax records even after you file. Even if the amount seems small or you believe it is not taxable, you should not ignore the form, because the IRS will expect to see it reflected on your return. Because unreported 1099 income can lead to additional tax, interest, and penalties, you should reconcile the form with your records and address any discrepancy with the issuer before filing.
You owe tax on original issue discount reported on Form 1099-OID because the tax law treats the discount as interest that accrues and becomes taxable each year, even though you typically do not receive the cash until the debt instrument matures. When a bond is issued for less than its redemption value, the difference is original issue discount, which the holder must include in income gradually over the life of the instrument rather than all at once at maturity. The annual accrued amount appears on the form and is taxed as interest income that year. This treatment, often called phantom income, means you may pay tax before receiving the corresponding cash. Box entries may also reflect adjustments, and tax-exempt OID on municipal instruments is reported separately. Because the accrual rules are technical and the reported amount may need adjustment for your purchase price, you should report OID carefully and keep records of your basis in the instrument.
Official Form 1099-OID is available from the IRS, and the copy filed with the IRS generally requires the official scannable format, so a downloaded PDF cannot simply be printed and mailed as the IRS copy. Filers can order official paper forms from the IRS, use accounting or specialized software, or file electronically through the IRS Information Returns Intake System (IRIS) or the FIRE system. Because filers submitting 10 or more total information returns must file electronically, most use software or an electronic filing service. The recipient copy may be furnished on paper or, with the recipient's consent, electronically. The forms-legal.com template helps users organize the information that goes on the form, but the official return must be submitted to the IRS through an approved channel. Because the IRS requires its scannable format for paper filing, filers should use official forms or electronic filing rather than the informational PDF.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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