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    #1

    1099 int

    A new client came to the office today. She said that her 1099 interest from Chase was under $10 so she does not have to report it. I asked her how much money she has in the Chase bank. She said that in September 2019 she deposited $160K and did not receive a 1099 at the end of the year. In September 2020 she closed an account from another bank and added the $50K to the Chase account. When she called for the 1099INT the customer service representative told her that because she did not make a withdrawal from the account a 1099 would not be provided. The interest of 2+K is capitalized.
    This is how an annuity works but I did not know it is also applied to regular CDs. Maybe I am missing something.
    Does anyone else know about this? These days taxes can be compared to science. Every minute something changes.
    Thanks
    ​​​​​​​Brian
    Everybody should pay his income tax with a smile. I tried it, but they wanted cash
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    #2
    It depends on the frequency that banks pay interest on CD's. Some can be monthly, others less frequently. There is a regional bank around here that only pays annual. Because the interest is not paid and compounded more frequently, it makes their advertised rate appear a little better for people that don't read the "small print". I'm surprised that there would be one that doesn't pay at least annually.

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      #3
      I can understand Banks paying monthly or quarterly. This bank does not even pay annually. They just add the interest to the principal and call it capitalizing.
      They would only issue a 1099 if the customer withdraws funds and incurs a penalty.
      If this is legal, I think I am going to use this bank. Leave the money in a CD and forget about it. When I retire I can use it like an IRA.
      Everybody should pay his income tax with a smile. I tried it, but they wanted cash

      Comment

        #4
        Let me know if you find an interest rate on a bank CD that you would be happy with for many, many years.

        Comment

          #5
          Originally posted by Brian EA View Post
          the customer service representative told her that because she did not make a withdrawal from the account a 1099 would not be provided.
          That sounds like an IRA.

          "You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard

          Comment

            #6
            Still, Why wouldn't the interest be taxable even if she didn't withdraw it? What did I miss?

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              #7
              I took some time off today and went to the bank. They admitted that it was a mistake and immediately issued a 1099.
              All's well that ends well.
              Thanks all
              Everybody should pay his income tax with a smile. I tried it, but they wanted cash
              • Likes 2

              Comment

                #8
                Originally posted by TAX4US View Post
                Still, Why wouldn't the interest be taxable even if she didn't withdraw it? What did I miss?
                It would be. See Pub 550.

                "If you buy a CD with a maturity of more than 1 year, you must include in income each year a part of the total interest due and report it in the same manner as other OID.

                This also applies to similar deposit arrangements with banks, building and loan associations, etc., including:

                • Time deposits,
                • Bonus plans,
                • Savings certificates,
                • Deferred income certificates,
                • Bonus savings certificates, and
                • Growth savings certificates."
                "You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard
                • Likes 1

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