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#322410 - 02/25/05 05:23 PM interest earned or bonus?
beegee Offline
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South
We are going to offer a consumer checking account with the following feature:

$5 for each new ACH set up during first 90 days of account opening date.

What issues do I need to be aware of?

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#322411 - 02/25/05 05:37 PM Re: interest earned or bonus?
rlcarey Offline
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rlcarey
Joined: Jul 2001
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Galveston, TX
If they set up 120 of them you trigger the 1099MISC reporting thresholds
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#322412 - 02/25/05 05:40 PM Re: interest earned or bonus?
beegee Offline
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South
This will be an interest bearing account and I was thinking that we had to report this as interest to the IRS if it greater than $10 - am I off-base?

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#322413 - 02/25/05 06:26 PM Re: interest earned or bonus?
rlcarey Offline
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rlcarey
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Galveston, TX
The IRS defines the term “interest” to mean amounts paid for the use or forbearance of money, which includes amounts, whether or not designated as interest, paid on savings accounts and other deposit arrangements.

IMHO - A payment for establishing an ACH transaction does not meet that threshold.
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#322414 - 02/28/05 07:57 PM Re: interest earned or bonus?
David Dickinson Offline
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David Dickinson
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Central City, NE
Quote:

This will be an interest bearing account and I was thinking that we had to report this as interest to the IRS if it greater than $10 - am I off-base?



Just a technicality, but I thought I would throw this out: the 1099 rules are NOT trigger by interest of more than $10. They are triggered if the interest is $10 or more.
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#322415 - 02/28/05 11:16 PM Re: interest earned or bonus?
beegee Offline
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Joined: Feb 2004
Posts: 1,092
South
Just want to be sure I understand because this is contrary to what my understanding is -

if we pay, say $25, on ACH sign ups then we have no requirements to the customer to either disclose this as a bonus or report to the IRS as interest.

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#322416 - 03/01/05 02:40 AM Re: interest earned or bonus?
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 79,236
Galveston, TX
That is correct, but you have to aggregate the $25 with all other payments classified as miscellaneous income to the customer for the year and report on a 1099MISC if that figures reaches $600.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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