Can an account holder request that the interest earned on their account due to an improper deposit be returned?

Yes.

Are you asking if they can request it be returned to the bank, or asking can they request it be returned to them after the bank adjusted their account upon discovery of the error?

The answer to both is yes.

1. They may not want the additional income reported on their 1099.

2. They can request it, but they are not entitled to it.

How? What affect does this have on the 1099?

The 1099 will report interest earned on the account. They may not want the "earned interest" due to a erroneous large deposit being credit to their account being reported as income. Also, if the account is not adjusted it would skew the average account balance which could cause problems in other areas for the account holder.

If the customer wants to keep the interest earned, then the 1099 must be filed. If the customer WANTS to return the interest that was credited to his acount, your bank MAY take this back, adjust his account, and not need to issue a 1099.

That is the case here. If someone was supposed to receive $500 but instead received $50,000 or $5000, their interest earned is 10 or 100 times what is supposed to be. Couldn't this cause a problem with the IRS?

Great question.

well, presumably it could. But in todays low interest rate environment, with checking accounts paying about 1% interest, the interest on 50,000 for 45 days is only $62. I don't think this is going to cause anyone issues with the IRS.

This is really a no-brainer - interest adjustments are made all the time in banking + and -. Errors are easily corrected, interest paid in error is easily returned and interest due but not paid is easy taken care of. All systems have methods of adjusting the year to date interest, during the year, and that amount can also be adjusting prior to forwarding a tape to the IRS after year end. One just needs to settle the needs of all those involved in an error and adjust the system to reflect that settlement.

This issue is at the level of Banking 101!

What is the time limit to ask for the return of interest? In other words, can it be asked after 60 or 90days?

Who does the interest go back to? The bank or the bank that originally sent the inappropriate wire amount?

Good question. Anyone know the answer?

Anyone know this answer?

Anyone? Anyone? Beuhler? Beuhler?

I agree with Paragon, but doesn't this raise suspicions about why someone would want interest to be returned?

How does the account holder request that interest be returned due to the wrong amount being deposited? Form or phone call?

Doesn't asking for interest to be returned sound kind of dumb? If a company sends you too much on a deposit, wouldn't you just keep the interest? Wouldn't asking for it to be returned just bring about a great deal of confusion?

This whole thread sounds kind of dumb, but yes, there are people in the world who would return the interest, as it is "not rightfully" theirs. As for causing confusion, well, look how many have posted here with questions.

Does this occur often?

I mean, how often do interest adjustments occur? Everyday?

Interest adjusts occur on a regular basis, but normally do not involved scenarios in which a customer wants to give back interest due to a mis-post or some other event. Normal interest adjustment activity relates to a delay in posting a transaction (debit or credit), errors and adjustments on the loan side when a loan is paid off with interest short a few bucks, etc. In all cases, the customer record must be adjusted at the same time as the YTD interest at the GL level or one ends up with real big problems trying to reconcile tax records after year-end.

Within the auditing area - one needs to make sure that YTD interest within each loan and deposit category is continually in balance with system records (system modules in balance with financial [GL] records). Bankers are infamous for charging interest adjustments directly to the GL without also adjusting the customer record.

Totally unrelated, but Ferris Buehlers Day Off is a great movie

But it is possible for a recipient to request the interest be returned, correct?