This has been discussed a lot in this thread, but I know it's hard to find things.After reading about the complexities of dealing with accrued interest and accrued market discounts on my tax return, I thought skipping the secondary market and buying US treasury bonds at auction would bypass all the complexity.
Unfortunately I missed that some of the 20 year bonds I purchased in Oct 2023 (CUSIP 912810TU2) were during an auction that sold "re-opened" bonds (and I did not receive any coupon payments in 2023), so my Vanguard 1099-INT has a non zero value for a line item:
The following amounts are not reported to the IRS. They are presented here for your reference when preparing your tax return(s).
Taxable accrued Treasury interest paid <a positive number>
And in the 1099 "detail" section, there is a negative number with the transaction type listed as "Treasury accrued interest pd" but this negative number matches the "taxable accrued treasury interest paid" earlier in the 1099-int.
So based on this other thread and from what I could pick through on this thread (viewtopic.php?t=271391), is it correct to say I do NOTHING with the taxable accrued treasury interest paid this tax year, but next year in 2024 when I receive my first interest payment from this treasury bond, I would SUBTRACT out the "accrued treasury interest paid" that showed up on this year's 2023 1099-DIV on my 2024 return?
If I have more interest reported on the 1099-INT than the accrued interest paid, I subtract the accrued interest paid for the tax year in which it was paid, regardless of whether or not I received a coupon for that particular bond. If I don't, I make a note of it in my income tax spreadsheet, and deduct it the following tax year.
I will buy you a beer if you do what I do and ever have it challenged in an IRS audit.
Statistics: Posted by Kevin M — Wed Jan 31, 2024 10:32 am — Replies 753 — Views 111399