What Goes in 1099-OID Box 6: Acquisition Premium

Box 6 on Form 1099-OID reports the acquisition premium your broker amortized during the year on an Original Issue Discount bond you bought on the secondary market for more than its adjusted issue price.¹ The number in Box 6 reduces the OID income you actually owe tax on. If it contains a dollar figure, you subtract it from the OID in Box 1 or Box 8 when you file. If it is blank or zero, there is nothing further to do.

Why There Is a Number in Box 6

An OID bond is one that was issued at a discount to its face value. That discount accrues as taxable interest income over the bond’s life, even though you don’t receive the cash until maturity or sale.

Acquisition premium comes up when you buy that bond from another investor after issuance and pay more than its adjusted issue price. The adjusted issue price is the original issue price plus all the OID that has already accrued up to your purchase date. If you paid more than that figure but still less than the bond’s face value, the excess is your acquisition premium.²

You are still buying at a discount to face value. It’s just a smaller discount than the original purchaser received, and the tax code lets you recover that overpayment by shrinking the OID income you report each year.

Do You Need to Adjust Your Return, or Did the Broker Do It for You

Brokers have two ways to handle acquisition premium on a covered security, and only one of them leaves work for you.

Under net reporting, the broker subtracts the acquisition premium from the gross OID and reports only the net amount in Box 1 (corporate and other non-Treasury bonds) or Box 8 (U.S. Treasury obligations). Box 6 is left blank. You report the Box 1 or Box 8 figure as-is and make no further adjustment.³

Under gross reporting, the broker puts the full, unreduced OID in Box 1 or Box 8 and reports the acquisition premium separately in Box 6. In that case you have to subtract Box 6 from the OID yourself.²

The quick test: if Box 6 has a dollar amount, you’re looking at gross reporting and you need to make an adjustment on Schedule B. If Box 6 is blank, the OID above it is already net.

How to Enter the Adjustment on Schedule B

When Box 6 contains a figure, reduce the OID on Schedule B (Form 1040), Part I:

Enter the full OID from Box 1 or Box 8 on line 1 with your other interest income.
Under your last line 1 entry, write a subtotal of all the interest listed.
Below the subtotal, write “OID Adjustment” and enter the Box 6 acquisition premium amount.
Subtract the OID Adjustment from the subtotal and enter the result on line 2.

That line 2 figure flows to the interest income line on Form 1040.⁴ The result is that you pay federal income tax only on the OID net of the acquisition premium amortization, which is the amount you economically earned.

Don’t double-dip. If the broker already netted the acquisition premium against the OID in Box 1 or Box 8 and left Box 6 blank, you cannot claim an additional reduction on Schedule B for that bond.⁴

When Box 6 Is Blank but You Still Have Acquisition Premium

Covered securities are the ones where the broker does the math for you. For a noncovered security, the broker reports only the gross OID and is not required to calculate or report acquisition premium at all.³

That means Box 6 will be blank even if you did pay an acquisition premium when you bought the bond. You are responsible for calculating the reduction yourself and entering it as an OID Adjustment on Schedule B. Federal law reduces the daily OID by a fraction: the acquisition premium (what you paid over the adjusted issue price) divided by the total remaining OID from your purchase date to maturity.⁵ Multiply the daily OID by that fraction, and subtract the result from the daily OID to get the amount you actually include in income.²

Skipping this step on a noncovered bond means reporting more OID income than you owe.

Acquisition Premium Is Not Bond Premium

Two different boxes on the same form deal with paying “too much” for a bond, and they mean different things.

Box 6, acquisition premium, applies when you paid more than the bond’s adjusted issue price but still less than face value. You are buying at a smaller discount than the original holder did.

Box 10, bond premium, applies when you paid more than the bond’s face value. That is a different tax situation with its own reporting rules and is not what Box 6 is about.

One more distinction worth naming: Box 8 reports OID on U.S. Treasury obligations. It is a type of income, not an adjustment. If a Treasury OID bond also has acquisition premium, Box 6 reduces Box 8 the same way it reduces Box 1 for a corporate bond.⁶

What Happens If You Handle Box 6 Incorrectly

The IRS receives a copy of every 1099-OID and matches the amounts to your return through automated processing. Two errors are common, and they cut in opposite directions.

Ignoring Box 6 when your broker used gross reporting means you enter the full Box 1 or Box 8 figure on Schedule B without the offset. You overpay your federal taxes. The IRS will not send you a refund for the difference on its own; you would need to file an amended return on Form 1040-X, and you have three years from the original filing date to do it.

Underreporting OID cuts the other way. Leaving OID off the return entirely, or subtracting more than the form supports, shows up in IRS matching as unreported income. The accuracy-related penalty for negligence is 20% of the underpaid tax, and interest runs from the original due date.⁷

The safe path is the simple one. Look at Box 6. If it’s blank, report Box 1 or Box 8 as printed. If it has a number, subtract it on Schedule B and report the net.

1
Internal Revenue Service. Form 1099-OID – Original Issue Discount
2
Internal Revenue Service. Publication 1212 – Guide to Original Issue Discount (OID) Instruments
3
Internal Revenue Service. Instructions for Forms 1099-INT and 1099-OID
4
Internal Revenue Service. Instructions for Schedule B (Form 1040)
5
Office of the Law Revision Counsel. 26 U.S. Code 1272 – Current Inclusion in Income of Original Issue Discount
6
Internal Revenue Service. Instructions for Forms 1099-INT and 1099-OID
7
Internal Revenue Service. Accuracy-Related Penalty