I recently opened up a new account at the bank, and they asked me to complete a Form W-9. Is this necessary?

Your investment income is generally not subject to regular withholding. However, it can be subject to backup withholding to ensure that income tax is collected on this income.

When you open up a new account, you must certify under penalties of perjury that your social security number is correct and that you are not subject to backup withholding. Form W-9 (PDF), Request for Taxpayer Identification Number and Certification , is used to make this certification. If you fail to make this certification on Form W-9, or similar statement, backup withholding will begin immediately on your new account, and a percentage of the interest paid on your account (29% after December 31, 2003; 28% after December 31, 2005) will be withheld. There are exceptions to this rule. For additional information on who is subject to backup withholding, refer to Tax Topic 307.

References:

• Form W-9 (PDF), Request for Taxpayer Identification Number and Certification
• Tax Topic 307, Backup withholding

I received dividends from my credit union. How do I report this income?

Certain distributions commonly referred to as dividends are actually interest. They include "dividends" on deposits or share accounts in cooperative banks, credit unions, domestic savings and loan associations, and mutual savings banks.

Report interest income on line 8a of Form 1040 (PDF) or Form 1040A (PDF), or line 2 of Form 1040EZ (PDF). If your taxable interest income is more than $1,500, be sure to show that income on Schedule B of Form 1040, or on Schedule 1 of Form 1040A. You cannot file Form 1040EZ if your interest income is more than $1,500. Refer to Tax Topic 403, Interest Received, for additional information on interest income.

References:

• Form 1040 (PDF), U.S. Individual Income Tax Return
• Form 1040A (PDF), U.S. Individual Income Tax Return
• Form 1040EZ (PDF), U.S. Individual Income Tax Return for Single and Joint Filers with No Dependents
• Tax Topic 403, Interest Received

I cashed some Series E, Series EE and Series I savings bonds, how do I report the interest?

If your total taxable interest for the year is more than $1500, you report (and separately identify) the interest on Schedule B of Form 1040 or Schedule 1 of Form 1040A. If your total interest is not more than $1500 for the year, report the savings bond interest with your other interest on the "Interest" line of your tax return. If you do not report the increase in the redemption value of the bonds as interest each year, you must report all of the interest in the year they are cashed or otherwise disposed of.

References:

• Publication 550, Investment Income and Expenses

How do I determine how much interest to report on U.S. savings bonds I inherited?

You may have choices, but it will depend on several factors. Before your question can be answered, you'll need to know:

the date of death of the deceased,

the type of bond you inherited (Series EE, Series E, Series I, or Series HH, or Series H),

whether the deceased was reporting the interest yearly or not, and

whether any of the interest was included on the decedent's final income tax return.

Once you have these facts, you can find your answer and any options that may be available by reading the appropriate section of Publication 550, Investment Income, Chapter 1, or call 800-829-1040.

References:

• Publication 550, Investment Income and Expenses

Is deferred interest on a U.S. savings bond (series EE, E, or I) that I inherited taxable to the deceased owner's estate, to the deceased on his or her final tax return, or to me when I cash them?

The deferred interest is not taxable to the estate. It is going to either be reported on the final return of the decedent or be reported by you, depending on the choice you make. If you are the surviving spouse, the choice is made by the executor or administrator of the decedent's estate as to who is responsible for filing the decedent's final return.

You may have choices, but it will depend on several factors. Before your question can be answered, you'll need to know:

the date of death of the deceased,

the type of bond you inherited (Series EE, Series E, Series I, or Series HH, or Series H),

whether the deceased was reporting the interest yearly or not, and

whether any of the interest was included on the decedent's final income tax return.

Once you have these facts, you can find your answer and any options that may be available by reading the appropriate section of Publication 550, Investment Income, Chapter 1, or call 1-800-829-1040.

References:

• Publication 550, Investment Income and Expenses

Can interest from some inherited U.S. savings bonds be included on the decedent's final income tax return and interest from other inherited U.S. savings bonds be included as interest to the beneficiary?

The same method of reporting interest must be used for all saving bonds owned by an individual. If the surviving spouse or executor of the decedent's estate elected to report accrual interest on bonds owned by the decedent and the decedent had not reported interest on saving bonds prior to their disposition or maturity, the surviving spouse executor of the decedent's estate would be required to treat all savings bonds owned by the decedent the same way. If you receive Series EE or Series I bonds from an estate in satisfaction of a specific dollar amount legacy and the decedent was a cash method taxpayer who did not elect to report interest each year, the interest earned after you receive the bonds is your income. The income earned to the date of death plus any further interest earned to the date of distribution of the bonds to you is income to (and reportable by) the estate. You have a choice. You can report the interest on the series EE or series I bonds, which you received in satisfaction of specific legacy, each year or you can report the interest which accrues from the date the bonds were distributed to you until the date you cash the bonds as interest in the taxable year in which you cash the bonds. If you have other series EE or series I bonds, you will be required to treat the interest on the saving bonds received in satisfaction of the specific legacy in the same way that you treat interest on the other savings bonds.

You may have other choices, that will depend on several factors. Before your question can be answered, you'll need to know:

the date of death of the deceased,

the type of bond you inherited (Series EE, Series E, Series I, or Series HH, or Series H),

whether the deceased was reporting the interest yearly or not, and

whether any of the interest was included on the decedent's final income tax return.

Once you have these facts, you can find your answer and any options that may be available by reading the appropriate section of Publication 550, Investment Income, Chapter 1. If additional clarification is needed, you can call 1-800-829-1040.

References:

• Publication 559, Survivors, Executors, and Administrators
• Publication 550, Investment Income and Expenses

I have a bank account in a foreign country. Do I have to report the interest?

If you are a U.S. citizen or resident alien with investment income from sources outside the United States (foreign income), you must report all that income on your tax return unless it is exempt by U.S. law. This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 or similar statement from the foreign payer.

You will report the income on Form 1040, Schedule B (PDF), Interest & Dividend Income. You may be required to Check the box "yes" on the bottom of Schedule B if you have a foreign bank account.

References:

• Tax Topic 403, Interest received
• Form 1040, Schedule A&B (PDF), (Schedule B) Interest and Dividend

I am a nonresident alien. Our broker withholds 30% tax on dividends. Can I get this tax back since I already owe tax in my residence country on overseas income?

Generally, this type of income paid to nonresident aliens is taxable at the 30% or lower treaty rate. If your country has a tax treaty with the U.S., you may have a reduced rate of tax. If that is the case, you should file Form 1040NR (PDF), U.S. Nonresident Alien Income Tax Return, to claim a refund of federal income taxes withheld. To avoid future excess withholding, provide your broker with a completed Form W-8BEN (PDF) , Certificate of Foreign Status of Beneficial Owner for U.S. Tax Withholding. You may be entitled to a credit against the tax you owe to your residence country for the U.S. tax that is withhold from your dividends.

References:

• Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities
• Publication 901, U.S. Tax Treaties
• Form 1040NR (PDF), U.S. Nonresident Alien Income Tax Return
• Instructions for Form 1040NR, U.S. Nonresident Alien Income Tax Return
• Form 8833 (PDF), Treaty Based Return Position Disclosure Under Section 6114 or 7701 (b)
• Form W-8BEN (PDF) , Certificate of Foreign Status of Beneficial Owner for U.S. Tax Withholding