by C/A Staff
Even while banks deal with a lot of acronyms and arbitrary numbers, the IRS likes to throw a few extras at us during tax time. Not only do we have to send out a 1098 to mortgage customers, we may have to send out 1099s to all sorts of folks.
One 1099 doesn’t sound bad, but the problem is that there is not just one 1099 – there are at least 21 different types. Luckily, banks only usually have to deal with about eight of them. This week, we’ll take a look at the requirements for the two that come up most often in a deposit customer scenario: the 1099-INT and the 1099-MISC.
Please note that if this is the first time you are thinking about 1099s this year, there could be a problem because all 1099s must be delivered to customers by January 31st of each year and are due to the IRS by the end of February. This article is more intended as reference for 2020 reporting. Of course, this article is no substitute for reviewing the instructions for the various IRS forms and seeking the advice of a tax professional.
Typically, the 1099-INT gets filed for each person to whom you paid at least $10 in interest income, interest on U.S. savings bonds and Treasury obligations, or tax-exempt interest during the tax year. Financial institutions submit this form when they pay interest to account holders as compensation for the bank’s use of deposited funds. It is important to note that the $10 minimum threshold for this requirement is similar to the threshold for the Reg. DD “bonus” threshold of $10.
While all gifts valued at more than $10 are bonuses, when given to open an account they would be considered interest based on the deposit requirements to earn the bonus. Per Publication 550, “For deposits of less than $5,000, gifts or services valued at more than $10 must be reported as interest. For deposits of $5,000 or more, gifts or services valued at more than $20 must be reported as interest. The value is determined by the cost to the financial institution.”
The 1099-MISC usually comes up in the context of a person to whom you have paid more than $600 during the year in prizes, awards, and other compensation. This may arise when you do a giveaway that is not conditioned on opening an account and making an initial deposit. Given the much higher threshold, this form comes up much less often.
For each of these forms you file with the IRS, you must provide a statement to the recipient of the income. While a recipient’s TIN may be truncated on the 1099-INT, the whole TIN is needed on the 1099-MISC. With either form, you must include the recipient’s account number(s) when you have multiple accounts for that recipient.
More information on these and other common 1099s is available in our IRS Reporting Webinar.