Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.
Q: In December of 1994, I bought a 6-month Treasury bill with maturity in May or June 1995. As I understand it, the interest that is earned is the difference between what I paid for the bill and what I get at maturity; therefore I assumed the interest would be counted in the 1995 tax year. However, I received a 1099 dated 1994 from the federal government. Does that mean that I must include the money that the Treasury returned to me, which was the difference between the face value and the purchase amount, as interest in 1994?
A: It appears that you received the 1099 in error. You should report the interest stated on Schedule B as interest income. This is because the IRS will be looking for matchup with amounts reported to them by the issuer of the 1099. Then, you will subtract the same amount on the next line of Schedule B, describing the error on the description line beside it. Treasury bill interest on a term less that 18 months is reportable when actually collected. Be sure to report the full amount on your 1995 return.
The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.
To submit a question, call Sundial, The Sun's telephone information service, at (410) 783-1800. In Anne Arundel County call 268-7736, in Harford 836-5028, and in Carroll 848-0338. Using a touch-tone phone, enter 6225 after the greeting. Push 1 to submit a tax question; state the question in full. Push 2 to hear a tax tip. Selected questions will be answered in the Business section.