If a taxpayer withdraws his or her deposit on a CD before the instrument matures,the penalty for the early withdrawal on interest will be reported by the financial institution:

Question

Quizplus · Accepted Answer

The penalty for early withdrawal on interest from a CD is reported to the taxpayer by the financial institution in Box 2 of Form 1099-INT, which is provided to the taxpayer by January 31st of the following year. Form EWIP does not exist, and a letter of notification may be sent by the financial institution, but it would not be the primary or official method of reporting the penalty. Therefore, the best answer is B.

If a Taxpayer Withdraws His or Her Deposit on a CD