Q: Do you pay tax yearly on the interest on CDs or do you pay when the CDs are cashed?
A: You report interest income received on Certificates of Deposit (CDs) in the year the interest is credited to your account. Each January, the financial institutions that hold your CDs send you 1099-INT Forms, which show the interest income you must report.
These questions are actual inquiries submitted by taxpayers to our AARP Tax-Aide Program. The AARP Tax-Aide Program is a volunteer-run, free tax-preparation and assistance program offered to low- and middle-income taxpayers with special attention to those age 60 and older. Our volunteers are trained and IRS-certified to understand individual federal-tax issues. Our volunteers provide tax assistance as a public service and cannot guarantee the accuracy of the information provided.