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$50 for Direct Deposit & Funds Transfer

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Question: 
Our marketing department has a promotion going on. We give existing customers $50 in cash if they either: (1) sign up for direct deposit, or (2) sign up for automatic loan payment from their bank deposit account. Would either of these payments be considered a "bonus" under Reg. DD? Are either or both of these payments considered "reportable interest" for 1099 purposes?
Answer: 

It's not a bonus under Regulation DD because it's not given for "opening, maintaining, renewing, or increasing an account balance."

It's also not interest under Regulation Q, because it's not linked directly or indirectly to the term or amount of a deposit. The instructions to form 1099-INT suggest that even though we might not call this money interest, it should be reported as such since it's credited to the customer's account.

First published on BankersOnline.com 1/17/05

First published on 01/17/2005

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