[Individual]Taxable Interest Income 1 (Feb-28-2011, 50 days left)

1. Dividends that are actually interest

Certain distributions commonly called dividends are actually interest, such as interest on deposits or on share accounts in : Cooperative banks Credit unions Domestic building and loan associations Domestic savings and loan associations Federal savings and loan associations Mutual saving banks

Generally, it will be shown as interest income on Form 1099-INT

2. Money market funds

It pay dividends and is offered by nonbank financial institutions, such as mutual funds and stock brokerage houses.

You consider it as dividend, not as interest.

3. Certificates of deposit and other deferred interest income

Interest may be paid at fixed intervals of 1 year or less during the term of account, or the CD mature in 1 year or less and will get interest at maturity day. You generally include this interest in your income when you actually receive it or are entitled to receive it without penalty. Even it happens to be a penalty for early-withdraw, you still keep the original amount as your interest income, then treat the penalty separately. (Pub 550)

If interest is deferred for more than 1 year, see Original Issue Discount (OID).

PSQ

Source: http://www.irs.gov