There appears to be continuing confusion over the reporting of Treasury bill interest on your federal income tax return. I wrote on this subject in a November column, but letters and phone calls since then indicate that I wasn't totally successful in getting the message across.

Let me try again. First, I should state clearly that interest earned on Treasury bills is subject to federal income tax but exempt from state and local income tax.

The major area of confusion seems to be the timing--that is, the date on which the interest is earned and you become liable for reporting it on your tax return.

If you buy a six-month T-bill during the first half of any year, it matures during the second half. No problem here--the interest is taxable and should be reported for the year in which both the purchase and redemption occurred.

But we run into a question if the purchase is made during the last six months of one year and the bill matures and is paid off in the following year. For which tax year do you report the interest?

Let me use the same example I used last November. We'll assume that next August (1982) you go to the office of the Bureau of Public Debt in the District and deposit a noncompetitive bid for a six-month T-bill at the following week's auction. Along with the bid you leave the required certified check for $10,000.

(A noncompetitive bid means you agree in advance to pay the average price of all bids accepted by the Treasury Department from the large institutional buyers like savings institutions and pension funds.

(You may submit a competitive bid in which you signify what you will pay. But then you risk not getting the bill at all, if your bid is lower than the lowest bid Treasury accepts that week.)

When the auction is over, we'll assume that the average bid was $9,250--a discount of $750 for the six-month bill, equal to 15 percent on an annual basis.

Shortly after the auction the Treasury Department will send you a check for $750. This is not your interest payment, and therefore is not income subject to tax.

Instead, it is the Treasury Department's refund to you of the difference between the $10,000 you deposited with your bid and the actual $9,250 cost of the T-bill, based on the results of the auction.

Six months later--in February 1983--the bill matures and the Treasury Department will then pay you $10,000, the full face amount of the bill.

Now you have received interest income of $750, the difference between the $9,250 you paid for the bill and the $10,000 face amount you were paid at maturity.

So the interest is taxable in 1983, the year the T-bill matures, and not in 1982, the year it was purchased.

And the true yield is not based on the amount of the discount, because you had only $9,250 invested for the six-month period rather than the $10,000 face amount.

So instead of 15 percent, the yield is actually 16.2 percent: $750 divided by $9,250 equals .081 for the six month period, multiplied by two to get the annual non-compounded yield.

Question: My children, aged 14 and 16 years, earned more than $3,400 each in interest last year. Should they file independent tax returns? If so, will I lose exemptions for them?

Answer: The answer to your first question is yes--each child will have to file his or her own tax return. For a child eligible to be claimed as a dependent on the parent's return the filing trigger is $1,000 of taxable interest, dividends or other unearned income.

Each child gets his own $1,000 personal exemption on his return, but can't take the zero bracket amount (the old standard deduction) unless he also had earned income of $2,300 or more. However, he can itemize on Schedule A and claim any legitimate deductions paid from his income.

And you get to claim the children as dependents on your own tax return too--one of the rare times when Uncle Sam allows a double benefit.