Do I Need to File a 1099 Form for a Savings Account?

Earning interest on your savings account literally lets you earn money while you sleep. Depending on your balance and the type of bank account, you could earn yourself some significant interest on the cash that’s just sitting in your bank account. However, like other types of income, you have to report the income properly on your income taxes. Making sure you file the correct paperwork and pay what you owe helps ensure you meet your tax obligations.

Purpose of Form 1099-INT

Any year that a bank pays you more than $10 in interest, it is required to send a Form 1099-INT to both you and the Internal Revenue Service. That way, not only do you know that you need to report the income, but the IRS also can crosscheck your return to make sure you’re reporting all of your interest income. If the IRS receives a 1099-INT that shows you received interest payments, but it doesn’t appear on your return, the IRS will question your return.

Interest is Taxable Even Without a 1099

If you earn less than $10 in a year from a financial institution, the bank isn’t legally required to send you a Form 1099-INT documenting the interest. However, that doesn’t mean that you don’t have to report it. Legally, you’re required to report all of your interest on your tax return, even if you don’t receive a Form 1099-INT. For example, if your savings account only earns $8 during the year, you might not receive a Form 1099-INT, but you are still required to report it in on your tax return.

Completing Your Tax Reporting

If you have $1,500 or less in taxable interest, you just report your interest income on your tax return. However, if you have more than $1,500 in taxable interest, you must file Schedule B with your income tax return, listing out each source of interest income. For example, you might have interest from different bank accounts like savings accounts or certificates of deposit, peer-to-peer lending, or a seller-financed mortgage you’re receiving payments on.

Understanding Your Tax Rates

Interest income is taxed at your marginal tax bracket. Interest income doesn’t qualify for the lower long-term capital gains tax rates, no matter how long you’ve kept your savings account open. For example, if you fall in the 12-percent tax bracket and you have $500 of interest, your interest increases your tax bill by $60. However, if you fall in the 32 percent tax bracket, that same $500 of interest would raise your tax bill by $160.