Original issue discount is the excess of the redemption value of an obligation over its issue price, and is amortized as interest income over the term of the obligation. The amount in box 1 is the amortization of the original issue discount for the year and should be reported as interest income on your tax return. Other period interest in box 2 is interest income other than the amortization of the original issue discount, and should also be reported as interest income on your tax return.
An early withdrawal penalty reported in box 3 may be taken as a deduction for adjusted gross income on Form 1040. Original issue discount on U.S. Treasury obligations, in box 6, should be reported as interest income for federal income tax purposes, but is exempt from state and local income taxes. IRS Publication 1212 contains information regarding any adjustments that need to be made to the amount you include as income for federal tax purposes.
Investment expenses in box 7 may be claimed as a miscellaneous itemized deduction on Schedule A.
1099-PATR – Taxable Distributions Received from Cooperatives
Distributions you receive from cooperatives should generally be reported as business income on Schedule C or C-EZ, or as farm income, on Schedule F or Form 4835, as applicable. But patronage dividends you receive on property bought for your personal use should not be included in your taxable income. And patronage distributions on capital assets or depreciable property bought for business use should be treated as a reduction in the basis of the property.
Boxes 7, 8 and 10 show credits passed through by the cooperative that can be claimed on the appropriate tax form: Form 3468 – Investment Credit, 5884- Work Opportunity Credit, 6478 – Small Ethanol Producer Credit, 8844 – Empowerment Zone and Renewal Community Employment Credit, 8845 – Indian Employment Credit, 8861 – Welfare-To-Work Credit, or 8896 – Low Sulfur Fuel Diesel Fuel Production Credit. The Alternative Minimum Tax (AMT) adjustment in box 9 should be reported on Form 6251.