Page 20 - Interest Income - Individuals Handbook

Key Points

Interest subject to Interest on

Money market funds. penalty for early tax refunds.
withdrawal.

 Money market funds pay
dividends and are offered by  If you withdraw funds from a deferred  Interest you
nonbank financial institutions, interest account before maturity, you receive on
such as mutual funds and may have to pay a penalty. You must

stock brokerage houses. report the total amount of interest paid tax refunds
 Generally, amounts you or credited to your account during the is taxable
year, without subtracting the penalty. See
receive from money market Penalty on early withdrawal of savings in income.
funds should be reported as chapter 1 of Pub. 550 for more
dividends, not as interest. information on how to report the interest
and deduct the penalty.
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