Topic: IRS Reporting
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Are we allowed to split interest reporting on IRS 1098 forms between two borrowers?
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We recently discussed this issue with an IRS, and their unofficial guidance is that banks should be selecting a single payor of record when reporting mortgage interest on 1098 forms. Both the regulations and the instructions for Form 1098 refer only to a single “payor of record,” which should be the principal borrower on the…
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Can we open an estate account using the social security number (SSN) of the deceased individual?
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We believe that the bank needs to obtain an EIN for every estate (even if it will be handled via small estate affidavit). The IRS has stated that “[p]ayers of interest and dividends report amounts on Forms 1099 using the identification number of the person to whom the account is payable. After a decedent’s death,…
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If a customer used a health savings account (HSA) to cover an overdraft in another account, is that a prohibited transaction? If so, should we correct our IRS filings?
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While we are not qualified to comment on the consequences of correcting your IRS filings, we believe that you should correct any inaccurate information reported to the IRS. IRS Notice 2008-59 states that the sanction for a prohibited transaction (such as borrowing from or lending to the HSA) is disqualification of the account as an…
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Do you know of any upcoming changes that will require self-granted trusts to have an EIN rather than using the grantor’s SSN?
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We are not aware of any recent changes to the rules governing Employer Identification Numbers (EINs) for grantor trusts. Whether you need to obtain an EIN for a grantor trust depends on how the trust’s tax return is filed. The instructions for the estate tax return, Form 1041, state that every trust that is required…
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Our outside auditors said that we are not applying partial loan payments correctly. Should we be applying partial payments to the loan principal first, and then to interest and charges?
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Your auditors are likely referring to IRS and banking regulations that govern the application of payments when loans are categorized as non-accrual and/or non-performing. The application of payments between principal and interest may differ for tax accounting and regulatory accounting purposes. Most of the BankersOnline posters do not make a distinction between the two sets…
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Do we need to collect taxpayer identification numbers from a joint account holder if the customer is not the primary owner of the account?
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We believe that a bank must obtain taxpayer identification numbers (TINs) when any customer opens an account, regardless of the customer’s status as to a joint account. Whether the bank needs to obtain a taxpayer identification number when an existing customer opens a new account is up to the bank. When a customer opens a…