Investing in a certificate of deposit (CD) is a good way to earn money without putting your principal at risk. The Internal Revenue Service (IRS) considers the interest you earn on that CD to be part of your taxable income, and you need to report that interest amount when you file your taxes. The IRS receives a copy of the interest statement the bank sends out, so if you fail to report this income you could receive some unwanted attention from the government.
Gather all of your interest statements and add up your total interest. You need to report the total amount of interest you received from all sources, including what you received from your CD. Each interest payor will issue a 1099-INT form. Make sure you have all your 1099-INT forms before you start preparing your taxes.
Enter the interest shown on the 1099-INT form on line 2 of your 1040EZ form or line 8 of the 1040A or 1040 form. If your combined interest from the CD and all other sources is greater than $1,500, you cannot use the 1040EZ to file your taxes.
Record the rest of your income, along with your exemptions, deductions and adjustments, on the tax form. Double-check your math and make sure all income is recorded properly. File the tax form electronically or through the mail.
Items you will need
- 1099-INT forms
- 1040 form
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