A Treasury Bill of course matures in less than 12 months and is not subject to Form 1099-B reporting. Interest flows to the Form 1099-INT by the difference between discounted to par purchase price and sale proceeds or par value at maturity. I would presume that that purchase price basis would be increased by the recognized interest income.
Should I report this sale/maturity on Form 8949 with the adjusted basis being equal to sales proceeds/par value resulting in a gain of zero?
I would think the more conservative way to prepare a tax return would be to report this on Form 8949. Thanks.
Are you sure about this? I don’t have any experience in purchasing T-Bills, but that doesn’t sound right, since maturing bonds and notes generally generate a 1099-B upon maturity.
You should just report what you are given on the 1099. If there is 1099-B information, you will need to report it on Form 8949. If there is only 1099-INT information, then just report it as interest on Schedule B.
Taxes and logic don’t always sync up. Reporting something that doesn’t need to be reported has the possibility of raising questions that will need to be responded to, instead of just providing context.
Yes! The 1099 from TreasuryDirect is horribly formatted and absurdly formed (and probably doesn’t meet the 1099 requirements that all commercial finance companies must adhere to), but the bottom line is still clear enough. Last year my 1099 from TreasuryDirect comprised of ONLY T-bills and the bottom line had one number and it was in box 3 - “Interest On U.S. Savings Bonds And Treas. Obligations (Ref. Box 3)”
I found this on page 4 Form-1099-B instructions…
Exceptions. Brokers are not required to file, but may file, Form 1099-B for the following.
Sales for exempt recipients, including the following.
a. Charitable organizations.
b. IRAs.
c. Archer MSAs and health savings accounts (HSAs).
d. The United States or any state or a political subdivision of the United States or any state.
e. Corporations. However, see Identifying a corporation, later, for instructions about how to know whether a customer is a corporation for this purpose. Also, you must file Form 1099-B for the sale of a covered security (defined later) by an S corporation if the S corporation acquired the covered security after 2011.
Sales initiated by dealers in securities and financial institutions.
Sales by custodians and trustees, provided the sale is reported on a properly filed Form 1041, U.S. Income Tax Return for Estates and Trusts.
Sales of shares in a regulated investment company that is a money market fund.
Obligor payments on the following.
a. Nontransferable obligations, such as savings bonds or CDs.
b. Obligations for which gross proceeds are reported on other
Forms 1099, such as stripped coupons issued before July 1,
1982.
c. Callable demand obligations issued before January 1, 2014,
that have no premium or discount.
Sales of foreign currency unless under a forward or regulated
futures contract that requires delivery of foreign currency.
Sales of fractional shares of stock if gross proceeds are less than $20.
Retirements of book-entry or registered form obligations issued before January 1, 2014, if no interim transfers have occurred.
Sales for exempt foreign persons as defined in Regulations section 1.6045-1(g)(1).
Sales of Commodity Credit Corporation certificates.
Spot or forward sales of agricultural commodities. See Spot or forward sales of agricultural commodities, later.
Some sales of precious metals. See Sales of precious metals, later.
Grants or purchases of options, purchases due to exercises of call options, or entering into contracts that require delivery of personal property or an interest therein.
Sales (including retirements) of short-term obligations issued on or after January 1, 2014. However, a broker may be required to file a Form 1099-INT for interest or original issue discount on a short-term obligation.
Sales of digital assets. See Sales of digital assets, later.
Looks like item 14 gives broker’s this reporting exception.
aj485 replied…
“Taxes and logic don’t always sync up. Reporting something that doesn’t need to be reported has the possibility of raising questions that will need to be responded to, instead of just providing context.”
After I posted I found this on page 1 Form 8949 instructions…
Individuals. Individuals use Form 8949 to report the following.
The sale or exchange of a capital asset reported on a Form 1099-K.
Gain or loss on the sale or exchange by a nonresident alien individual of an interest in a partnership that is engaged in a U.S. trade or business.
The sale or exchange of a capital asset not reported on another form or schedule.
Gains from involuntary conversions (other than from casualty or theft) of capital assets not used in your trade or business.
Nonbusiness bad debts.
Worthlessness of a security.
The election to defer capital gain invested in a qualified opportunity fund (QOF).
The disposition of interests in QOFs.
Looks like the third item requires reporting on the Form 8949. However…thanks for the replies !
Good to know this anecdotal evidence of your tax reporting experience. I am trying to income shift interest income from 2024 calendar year to 2025. I am under the assumption that interest income on T-bills is recognized in the tax year of maturity and not spread out over the holding period. Did some of this interest income span a T-bill holding period covering a portion of the prior year and the entire interest reported on Form 1099-INT was delayed until maturity?
I would disagree. First of all - the T-bill will be redeemed. The redemption of a T-bill is not a sale or an exchange of the T-bill. When you sell or exchange an asset, the buyer will own the asset, and you will own the proceeds. Except the T-bill won’t exist after it’s redeemed. It gets extinguished.
Second, the proceeds from the redemption will be reported on Schedule B because of the 1099-INT you will receive.
T-bills (all 52-week or shorter) pay all the interest at maturity. And therefore the interest is taxed in the year of maturity.
T-notes and T-bonds typically pay interest twice a year, on Jan 15th and Jul 15th or nearest business day. The interest that is taxed is the sum of the January and the July interest payment in each year.
TIPS are a little different, they have a coupon and they have an inflation adjustment. The coupon is taxed in the year it is paid (Jan and July), and there is phantom interest from the inflation adjustment that is taxable in the year the bond is adjusted.
The general rule for interest is that it is taxed in the year it is received.
You noticed that too. It’s a shame the government can’t print and subsequently envelope their documents rather than the stuff they mail out. Poor. Very poor.
But I receive 1099s from TreasuryDirect (all T-bills) and from my broker (some T-bills, etc). And the one from the broker is MUCH better formatted and has a much higher level of clarity.
So under that assumption if I sell the T-bill before maturity it becomes a sale and I still won’t receive a Form 1099-B…then would I report this on the Form 8949?
The interest income reported on Form 1099-INT is income not a reporting of the sale or exchange of a capital asset.
I’m not 100% sure, and @aj485 will probably comment later. But I suspect that when you sell a T-bill, you have to apportion the sale amount into two portions, an interest portion, and a capital gain/loss portion. The interest would be reported on schedule B as usual, and the capital gain/loss would be reported on schedule D as usual. However, there may be special rules for T-bills.
So, if you buy a 91-day T-bill for $9727, normally you would receive $10000 when it matures. And you would receive a 1099 with $273 of interest and report it on schedule B.
The next paragraph is my best educated guess as to how taxes would be reported for the sale of a T-bill. It’s a guess because I’ve never sold a T-bill, I always let them mature.
Now, let’s say you sell that T-bill after 61 days for $9907. In that case, the interest for 61 days is ($383 / 91) * 61 which is $183. Now you report $183 of interest on schedule B as usual. So $9907 sales price minus interest of $183 minus basis of $9727 = -$3, and you report a capital loss of $3 on schedule D.
In general, I don’t advise selling T-bills unless absolutely necessary. You rarely will have a gain, and you will almost always lose some of your interest on a net basis. If you anticipate needing money in the interim, it is far better to set up a T-bill ladder that will provide cash flows on a regular basis. Then each time a T-bill matures, you can decide “do I need the money now, or can I reinvest?”. That’s pretty much what I do - I have T-bills maturing twice a week, and twice a week (every Tuesday and Thursday) I decide if I reinvest or if I keep the money in cash. After doing this for a while, I have a full ladder of all T-bills. And as such, there is constant cash flow if needed.
I don’t think that’s a good assumption. In order to sell a T-Bill before it matures, you have to transfer it to a brokerage. From the Treasury Direct website Selling Treasury Bills — TreasuryDirect
Because it’s a sale of the T-Bill, not a redemption, my expectation would be that the broker would issue a 1099-B (just like sales of other assets), which you would then have to report on your 8949. It’s likely that you will have a capital gain or loss on the sale, unless you managed to sell it at exactly your discounted value on that day. I went through the math of that calculation in this thread Taxation of Treasuries - Financial Planning / Tax Strategies - Motley Fool Community
But you didn’t sell or exchange the T-Bill - it was redeemed.
No. It’s repayment of the loan you gave the government when you purchased the T-Bill. That’s neither a sale or an exchange.
Look - you can report the redemption at maturity of T-Bills on your Form 8949 if you want to. But since, as evidenced by @MarkR’s experience, you don’t have to - Don’t be surprised if that reporting results in getting questions.
Until they force everyone to move their securities from the Legacy Treasury Direct accounts to the current Treasury Direct accounts, they will still be mailing out some 1099s.
