The interest income reported on your W-2 form is the interest earned by certain investments throughout the year. If you earn interest on investments, the IRS considers it income, and you have to pay taxes on those funds.
Examples of investments that report interest income on W-2 forms include savings or checking accounts; certificates of deposits, or CDs; and money market accounts. Interest earned from bonds not issued by a state or local government is also considered income.
Report all interest income to the IRS. Toward the end of the tax year, you should receive interest statements from accounts for which you earned interest income. If you earned interest from state or local municipal bonds, the interest is not taxable, but you still have to report the amount earned.
If the total amount of interest income for all the accounts is not greater than $1,500, you can put that amount on your 1040 tax form. If the amount is greater than $1,500, you should receive a 1099-INT form and must report the amount to Schedule B if you file a 1040 or Schedule 1 if you file a 1040a.