Most interest that can be withdrawn by a taxpayer without penalty is considered taxable income by the IRS, with some exceptions. Interest recipients should receive Copy B of form 1099-INT or form 1099-OID, which report taxable or tax-exempt interest payments of $10 or more. These forms typically are issued by a broker as part of a composite statement. Interest earners must report all taxable and tax-exempt interest on their federal income tax returns, whether or not they receive a form 1099.