Is interest of less than $10 taxable?

"Even if you do not receive Form 1099-INT, you must still report *all* of your taxable interest income," is pretty cut and dried. Ya think? It does not say that interest of less than $10 isn't reportable, does it? It says *all*. (My emphasis, just in case you missed it.)

FYI, just because you don't get a 1099-INT does not mean that the IRS wasn't notified of the amount. Truth is, they were, but the bank decided to save a few trees and a few hundred thousand dollars in postage by not sending out the ones that were not required by law. The reporting to the IRS is done electronically and the cost per item is less than a penny vs several dollars to print, stuff, and mail a single paper form.

I used to work in the banking industry and the cost of printing and mailing 1099-INT forms is much higher than you'd imagine. Since they are a "low use" item, the cost to run them and mail them out is much higher than the monthly statements is. Additionally, many banks now use the "substitute form rule" and simply add a notice to the bottom of your last statement of the year showing the total interest paid. This suffices for the separate 1099-INT.

Edit: Uhhh... Yeah, the IRS does explicitly address the issue: "Even if you do not receive Form 1099-INT, you must still report *ALL* of your taxable interest income." All means just that: ALL

Taxable Interest Income

I understand the problem with the wording on the IRS website in identifying if that specific category of interest is taxable! (The IRS is notorious for ambiguous wording) Yes, it is. Code Section 61 basically says all income is taxable. Because your interest of less than $10 is income, it is therefore taxable. If your total and only interest for the year was less than $10, technically it's reportable taxable income, but it's really immaterial and it's okay to leave it off. (The most it could possibly affect your total tax liability would be only $1-3 and the IRS is not concerned with this.) Hope this helps =)

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RE:

Is interest of less than $10 taxable?

Financial institutions do not issue 1099 INT forms for interest of less than $10. I assume that such interest is still taxable, but I could not find that explicitly stated on the IRS site.

Pub 550 does state that "Even if you do not receive Form 1099-INT, you must still report all of...

The IRS is not likely to flag you for an audit over your interest income of less than $10, the cost to send an agent to harass you over it far exceeds the extra $2 in tax they might collect....while you are required to report ALL income, I would not lose sleep over forgetting or foregoing the reporting of interest under $10.....

Pub 17, page 56, "Taxable interest includes interest you receive from bank accounts . . ."

Yes it is. What do you think that line from Pub 550 says? It's a general statement that says "ALL" and would have no reason to specify under or over a certain amount.

What part of "you must still report all of your taxable interest income" is unclear?

Yes, you must report and pay taxes on it.

no, the banks are not required to report $10 or less, therefore it is not considered material enough to IRS to claim it

in fact, if you prepare your return without the $10 and then also with the $10 you will see it will probably not make any difference in your return at all, the tax you owe or the refund you might be getting

of course if you had several accounts, all earning less than $10 interest, it would make a difference, therefor reporting would definitely affect your return