Form 8281: Information Return for OID Instruments
Understand the role of Form 8281, the IRS return issuers use to report OID data, ensuring accurate tax reporting for brokers and investors.
Form 8281 is an information return filed with the Internal Revenue Service (IRS) by issuers of publicly offered debt instruments with Original Issue Discount (OID). OID is the excess of a debt instrument’s stated redemption price at maturity over its issue price, which occurs when a bond is issued for less than its face value. The form provides the IRS with data that allows brokers and middlemen to accurately report OID income to investors, who must then report it on their tax returns.
Who Must File Form 8281
The issuer of the debt instrument, such as a corporation or government entity, is responsible for filing Form 8281. An underwriter or agent involved in the issuance may also handle the filing. The form is required if the debt instrument is publicly offered, meaning it is available for purchase by the general public and may be registered with the Securities and Exchange Commission (SEC).
The instrument must also have OID and a maturity date of more than one year from its issue date. There are several exceptions where a Form 8281 is not required. These include U.S. savings bonds, tax-exempt obligations, and short-term obligations with a fixed maturity date of one year or less. The form is also not needed for certificates of deposit (CDs) or for instruments where the OID is considered de minimis.
Information Required for Form 8281
Completing Form 8281 requires specific details about the issuer and the debt instrument. The form requests basic issuer information, including the legal name, address, and Employer Identification Number (EIN). This section identifies the entity responsible for the debt offering.
Filers must provide the CUSIP number, a unique nine-character code that identifies a North American financial security. The form also requires the issue date, which is the date the instrument was first sold to the public, and a brief description of the debt instrument, such as “10-year senior notes.”
Filers must provide the financial data needed to calculate the OID, including the issue price and the stated redemption price at maturity. From this data, the yield to maturity must be determined, which represents the total return anticipated on a bond if it is held until it matures.
The form requires the reporting of the amount of OID per $1,000 of face value for each accrual period, which is typically a six-month period. This information is often presented in an attached schedule that details the daily portion of OID for the instrument’s life. This allows investors to accurately calculate the OID income they must recognize each year.
Filing Process and Deadlines
The issuer must submit two copies of Form 8281, along with any required attachments like an OID amortization schedule, to the IRS. A separate filing must be completed for each issue of debt instruments that meets the reporting criteria.
The form must be filed within 30 days of the debt instrument’s issue date. If the instrument is registered with the SEC after its issue date, the deadline is 30 days after the registration date. The forms are mailed to the Department of the Treasury, IRS Service Center, Ogden, UT 84201-0209. An issuer who fails to file on time is subject to a penalty of 1% of the aggregate issue price, up to a maximum of $50,000 per issue, though the penalty may be waived for reasonable cause.