Posted By: Getting_Grayer
Definition of Interest for Tax Reporting - 01/25/12 06:05 PM
I have a question concerning whether this premium is considered interest or not. We did a refer-a-friend program paying $50 to both the referrer and the referee. The details were a checking account had to be opened and either a direct deposit had to be made or 3 debit card transactions in order to earn the $50. A minimum deposit of $25 was required to open the account, but no minimum balance or time frame to keep the account open. In the definition of interest in the FDIC Rules and Regulations it states:
§330.101(e) Notwithstanding paragraph (a) of this section, any premium that is not, directly or indirectly, related to or dependent on the balance in a demand deposit account and the duration of the account balance shall not be considered the payment of interest on a demand deposit account and shall not be subject to the limitations in paragraph (a) of this section.
Since the premium was not “directly or indirectly related to or dependent on the balance” in the account, or the duration of the account but on the customer’s use, I am not sure if the definition applies. We are trying to determine this for both IRS reporting as well as FDIC insurance issues.
Thank you for your help.
§330.101(e) Notwithstanding paragraph (a) of this section, any premium that is not, directly or indirectly, related to or dependent on the balance in a demand deposit account and the duration of the account balance shall not be considered the payment of interest on a demand deposit account and shall not be subject to the limitations in paragraph (a) of this section.
Since the premium was not “directly or indirectly related to or dependent on the balance” in the account, or the duration of the account but on the customer’s use, I am not sure if the definition applies. We are trying to determine this for both IRS reporting as well as FDIC insurance issues.
Thank you for your help.