1) Q: I know I earned interest on money I have in an account, but I did not receive a 1099. How should I go about figuring out how much money to report?

A: Make sure the interest is not earned on money in an IRA account. If that is the case the interest does not need to be reported. Assuming the interest is earned on money in a regular account try to contact the institution where the interest was earned and ask them to issue or re-issue the 1099. If that is not possible, calculate the interest earned based on the statements that were issued on that account.

Example: A taxpayer has $20,000 in a money market account but can not find the 1099 stating how much interest was earned on that investment. The taxpayer contacts the bank and asks them to fax him a copy of the 1099 so he will have the exact amount to report.

2) Q: I earned interest on government bonds. How should I report this?

A: If the interest is earned on a state bond, and you live in that state, no tax is payable but you still need to report the amount of interest you earned. If you do not live in the state where the bond was issued you will have to pay state taxes.

Example: A Los Angeles resident invested money in a bond issued by the city of Baker, California. The Los Angeles resident will not have to pay taxes on the interest earned because he lives in the same state in which the bond was issued.

3) Q: I earned interest on money in a foreign bank account. How should I report this?

A: Americans are taxed on their worldwide income so this interest must be reported and it will be taxable. If foreign taxes were paid on this income the amount that was paid can be offset against US taxes using the foreign tax credit. This tax credit prevents double taxation.

Example: An American citizen owns a one year Canadian Dollar CD. The American citizen receives a notice from the bank where his CD is held informing him of the amount of interest he made and the amount of Canadian taxes that were paid to the Canadian Government. The American citizen must report the amount of interest earned on his tax return, but he can offset some of the taxes he will owe using the foreign tax credit.

4) Q: I earned interest on money held in a partnership. How should I report this?

A: Money that you made in a partnership will most likely be reported to you using a K-1 form. There is a special line on this form for interest income. The interest should be reported along with other interest income separate from the rest of the partnership income.

Example: A taxpayer owns a 10% share in a partnership. The partnership keeps a cash reserve in a money market account. The money in this account earns a small amount of interest. When the taxpayer receives his K-1 stating his share of the income there is a separate line for interest earned. The taxpayer puts this amount on his return along with other interest income separate from the rest of the partnership income.