This article was updated for Tax Year 2023, last edited on December 18th, 2023.
To understand Form 1099-OID, it’s helpful to first understand what an OID is.
Bonds can sometimes be issued at a price lower than their face value, which is known as a discount. An Original Issue Discount (OID) is the difference between the original face value amount of a bond and the discounted price paid for a bond. For the purposes of taxes, the IRS generally considers an OID to be “the excess of an obligation’s stated redemption price at maturity over its issue price (acquisition price for a stripped bond or coupon).”
Form 1099-OID is issued if the OID (that the IRS considers includible in gross income) meets any of the following criteria:
at least $10
foreign tax was paid on the OID
federal income tax was withheld under the backup withholding rules
It is possible that you may receive a consolidated 1099 form from your bank. A consolidated Form 1099 may combine up to five separate 1099 forms (1099-B, 1099-DIV, 1099-INT, 1099-MISC, and 1099-OID) into one tax reporting document and will show your reportable income and transactions for the tax year from the issuer.
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