Original Issue Discount (OID)

Sometimes bonds are issued (sold) at a discount (thus the term “original issue discount”) and then some years later mature at face value. The difference between the issue price and the face value represents the interest paid by the bond issuer. A portion of that interest, referred to as “OID,” must be reported annually even though the bond owner doesn’t actually receive any of the interest until the bond matures. Information about the amount to report is provided to the bond owner on Form 1099-OID.