Bills are not Zeros. The government doesn't issue Zeros. Those are STRIPS which the brokers create from Bonds.OK, I was doing some more research and it looks like the tax treatment for CDs and Zeros are the exact same. You pay imputed interest even though the actual interest is paid at maturity:
https://www.depositaccounts.com/blog/cd ... taxes.html
Original Issue Discount (OID) and CDs
There’s a complication when a CD has a term of over one year and the bank chooses to pay interest only at maturity. The last sentence of the above excerpt references the section on Original Issue Discount (OID). The OID section of Publication 550 defines OID as follows:
OID is a form of interest. You generally include OID in your income as it accrues over the term of the debt instrument, whether or not you receive any payments from the issuer.
More details on OID specific to CDs are provided in the next page of the OID section:
If you buy a CD with a maturity of more than 1 year, you must include in income each year a part of the total interest due and report it in the same manner as other OID.
So if the bank doesn't pay interest until the CD matures and the CD term is over one year, the bank should send out the Form 1099-OID and the CD account holder must include this "phantom interest" or "imputed interest" in his or her income each year.
So, looks like 1099-OID is what describes imputed interest.
Bills get taxed in the year they mature. They're only issued for a maximum of 52 weeks. You buy them at a discount. When they mature, the difference between what you paid and face value is interest and counts as income in the year it matured.
If you buy an 8-week bill in December, the interest is taxable in the following tax year.
Statistics: Posted by exodusNH — Thu Feb 15, 2024 1:48 pm — Replies 7 — Views 202
