03/03/2008
I recently joined a bank - just in time to jump into the tax reporting errors! In 2007 we offered a wide variety of promotional campaigns. In some campaigns, we offered bonus dollars (more than $20) for a new account opening. We also offered a bonus gift for closing on a loan with us (value over $25). We gave away gift cards (again, more than $20 value) for a new account relationship and finally, had a gift book where customers could choose a gift based on the number of times they used their debit card. The people that received these bonuses included businesses, consumers, lending and deposit relationships.It is my understanding that if the value of the premium - cash or physical item - is greater than $20, a 1099-INT must be created for the value of the item. However, there are others who believe that only cash items or gift cards fall under the 1099-INT rule and physical items fall under 1099-MISC reporting. If under 1099-Misc, it is understood that the value must be greater than $600 and does not apply to businesses.What is the proper way to report the following - assuming value over $20, and what special rules would apply if the recipient was a business?<ol><li>Bonus dollars added to deposits<li>Gift cards given for referring a friend <Li>Gift cards given for opening an account<Li>Gift item given for closing a loan<Li>Gift item given for debit card usage.</ol>
01/21/2008
We are wanting to run a promotion for the launch of a new employee website to encourage employees to bank at our bank. The promotion will consist of winning $50 gift certificates. Employees that currently have accounts and employees that open accounts during promotion would be eligible for drawing. Would this be considered a lottery?
01/21/2008
We have paid cash bonuses to customers for referring friends to us to open a checking account. Do we report this bonus on a 1099MISC as a miscellaneous bonus (for bonuses over $600) or on a 1099I as interest(for bonuses over $25)?
10/29/2007
Our Marketing department would like to have a promotion in which certain new deposit accounts are given free movie tickets if they mention seeing the ad. I know that if it's for a demand deposit account, we'll have to stay within the dollar amounts set by 217.101. Marketing would like to see this as an on-going thing. Mail these customers free movie tickets periodically (as often as allowable) while the account is open.My question is in regard to (a)(1) of 217.101. I know we can do it at account opening, but I'm reading that for the periodic bonuses to go out that there must be a renewal or at least an addition to the account. I'm not familiar with the concept of a demand deposit account renewing. What would qualify under those categories? Also, how would this situation change if we were talking about non-demand accounts?
10/22/2007
My question is about advertising a checking account. I am well aware of the requirements (I think) of Reg DD when a bonus is offered. What if a bonus is offered on an account that is non-interest bearing, and therefore 'No APY' applies? Since a bonus is offered, you must disclose APY info and triggering terms, but since this is not an interest-paying account what do you disclose: nothing at all or that APY does not apply?
10/08/2007
Our marketing department would like to have a promotion in which certain new deposit accounts are given free movie tickets if they mention seeing the ad. I know that if it is for a demand deposit account, we'll have to stay within the dollar amounts set by 217.101. Marketing would like to see this as an on-going thing. Mail these customers free movie tickets periodically (as often as allowable) while the account is open.My question is in regard to (a)(1) of 217.101. I know we can do it at account opening, but I'm reading that for the periodic bonuses to go out that there must be a renewal or at least an addition to the account. I'm not familiar with the concept of a demand deposit account renewing, what would qualify under those categories? Also, how would this situation change if we were talking about non-demand accounts?
07/09/2007
Our marketing department would like to have a promotion in which certain new deposit accounts are given free movie tickets if they mention seeing the ad. I know that if it's for a demand deposit account, we'll have to stay within the dollar amounts set by 217.101. Marketing would like to see this as an on-going thing. Mail these customers free movie tickets periodically (as often as allowable) while the account is open.My question is in regard to (a)(1) of 217.101. I know we can do it at account opening, but I'm reading that for the periodic bonuses to go out that there must be a renewal or at least an addition to the account. I'm not familiar with the concept of a demand deposit account renewing--What would qualify under those categories? Also, how would this situation change if we were talking about non-demand accounts?
03/26/2007
I sat in on the contests, bonuses, sweepstakes and lotteries webinar in November and have a question regarding this topic. The bank's charitable foundation is sponsoring a table at the Rotary Club's Texas Hold-em charity night. Would it be permissible to place a poster publicizing this event in the bank's lobby?
12/11/2006
Would holding a drawing for a $500.00 savings account constitute a lottery and therefore be prohibited? There is no purchase necessary to enter the drawing and the drawing is open to customers and non-customers alike.
07/31/2006
Even though I read through the white paper "Bonus on Accounts" that David Dickinson wrote, I am having trouble determining the compliance impact to our bank if we elected to pay for the first order of checks and the cost of the checks exceeds the $10/$20 "premium rule."I would appreciate feedback on any of the following:<ol><li>We could not exceed the $10/$20 premium rule if the account was a true demand deposit.<li>If the value of the $10/$20 premium rule is $12.00, but the cost ends up being less than $10.00 because the vendor provides a volume discount, which amount is the bank allowed/required to apply?<li>Under Reg. DD, is the payment of the first order of checks considered the absorption of expenses or the reduction of fees? </ol>