Got IRS letter for interest income - How do I report this on my taxes?

This is actually pretty common! When the IRS sends you interest, they're required to report it just like any other financial institution. That interest is taxable income, even though it came from the IRS themselves. You'll need to add this as an additional 1099-INT in your tax software. Even though the form looks different than your credit union's form, the concept is the same. The payer ID number you mentioned (38-1798424) is the IRS's taxpayer identification number. In your tax software, you should be able to add a new 1099-INT, enter the IRS as the payer (literally just type "Internal Revenue Service" or "IRS"), input that ID number, and put the interest amount in Box 1. This is separate from your credit union interest - don't combine them, as they're from different payers.

Hey! I had this same situation last year and found that taxr.ai was incredibly helpful. The IRS interest reporting confused me and my software wasn't super clear either. I uploaded my letter to https://taxr.ai and it immediately identified it as IRS interest income and showed me exactly how to report it. They explained that this happens when the IRS pays interest on delayed refunds (which I didn't even realize was a thing!). The site guided me through adding it as a separate 1099-INT with the IRS as the payer. Definitely made the process way less stressful. They also provided some tips about other commonly missed tax situations that might apply to me.

Just wanted to follow up - I decided to try taxr.ai after all for this exact IRS interest issue and a couple other tax questions I had. Really glad I did! The service was super straightforward and gave me clear guidance on reporting my IRS interest payment. They explained that the IRS's EIN (that ID number) needs to be entered exactly as shown on the form, and that the interest goes in Box 1 as ordinary interest. What was most helpful was that they provided screenshots showing exactly where to enter it in my specific tax software. Saved me tons of time compared to googling around and getting conflicting advice.

If you're still having trouble getting clear answers about this or any IRS issues, I'd highly recommend using Claimyr (https://claimyr.com). I needed clarification on some interest reporting last year and spent HOURS trying to get through to the IRS with no luck. Claimyr got me connected to an actual IRS agent in about 15 minutes - seriously! There's a short video that shows how it works: https://youtu.be/_kiP6q8DX5c The agent confirmed that IRS interest should be reported as a separate 1099-INT entry, explained why I received it (delayed refund), and even answered some unrelated tax questions I had while I had them on the phone. Completely worth it instead of listening to the "high call volume" message for hours.

I have to admit I was completely wrong about Claimyr. After my skeptical comment, I was still desperate to talk to someone at the IRS about my situation (which was similar to yours with IRS interest plus some other issues). Out of desperation, I tried the service. To my surprise, I got connected to a real IRS agent in about 25 minutes. They verified my identity and everything, and I could tell I was actually talking to someone at the IRS. The agent confirmed that for IRS interest payments, you just need to add another 1099-INT with the IRS as the payer and their EIN in the ID field. They also explained that I received interest because my refund from the previous year was delayed by over 45 days. The whole call took less than 10 minutes and saved me hours of research and worry!

I think it's super weird that the IRS makes you report interest they paid you. Like, they know they paid it to you, it's literally their money? Why make us jump through hoops to tell them what they already know?? The tax system is so broken lol.

Quick tip from my experience: make sure you look at what tax year the interest is for! Sometimes these IRS interest payments relate to a prior year's refund but need to be reported in the current year. I got confused because I received interest in 2024 for my 2022 refund that was delayed, but had to report it on my 2024 taxes, not as an amendment to 2022.

Just wanted to add that you should definitely keep that IRS letter with your tax records! Even though it might look unofficial compared to a regular 1099-INT, it's still an important tax document. I made the mistake of filing mine away too early last year and then panicked when I couldn't find it during tax prep. Also, if the amount seems off to you or you're not sure why you received interest, you can always call the number on the letter to verify. Sometimes there are calculation errors, though they're pretty rare. The IRS is usually pretty good about explaining exactly what the interest payment is for - whether it's from a delayed refund, an amended return, or some other processing delay on their end.

I went through this exact same situation a couple years ago and it was confusing at first! The key thing to remember is that this IRS interest is completely separate taxable income, even though it came from the government. What helped me was thinking of it this way: the IRS is acting like any other financial institution when they pay you interest. They're required by law to report it to you (and to themselves) just like your bank or credit union does. For your tax software, just add a new 1099-INT entry with "Internal Revenue Service" as the payer name, use that EIN number (38-1798424) they provided, and enter the amount in Box 1 for interest income. Keep it completely separate from your credit union's 1099-INT - don't combine them since they're from different sources. The good news is this won't cause any issues with the IRS since they already know they paid you this money. In fact, they're expecting you to report it! And congrats on getting interest from them - it usually means they took longer than they should have to process something, so it's their way of making it right.