Form 1099 OID

In the United States, a Form 1099-OID is a tax form intended to be submitted to the Internal Revenue Service by the holder of debt instruments (such as bonds, notes, or certificates) which were discounted at purchase to report the taxable difference between the instruments' actual value and the discounted purchase price. Some misinformed filers do not understand the purpose of the form and misfile it attached to their tax returns. Others intentionally misreport on the form, aiming to reduce tax payments, or to generate large refunds, in what's called 1099-OID fraud. The method works because the IRS does not cross-check tax returns with reported 1099-OID information. Peter J. Reilly, writing for Forbes, explained that "[w]hat is amazing about the OID scheme, is that it has absolutely nothing to do with OID, other than using the same form". Essentially, the fraudulent filing of the 1099-OID form is successful because the inconsistencies on the form are not noticed, and tax refunds are computed with the inaccurate information submitted on the form.