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Ashin
New Member

In August of 2020 I refinanced my Auto Loan. The lender was offering $250 to me as an incentive to refinance with them. They sent me a 1099-INT for this payment. Why?

I was unaware that monetary incentives offered to encourage business transactions like auto loans were considered Interest income. Is it legal for my lender to report this as interest income on my behalf? Because it definitely was not interest income...
4 Replies
DMarkM1
Expert Alumni

In August of 2020 I refinanced my Auto Loan. The lender was offering $250 to me as an incentive to refinance with them. They sent me a 1099-INT for this payment. Why?

From a tax standpoint, since you received a Form 1099-Int, the IRS also received that form and will be expecting to see that on your tax return.  You would need to report it in the "Interest and Dividends" topic.   

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Ashin
New Member

In August of 2020 I refinanced my Auto Loan. The lender was offering $250 to me as an incentive to refinance with them. They sent me a 1099-INT for this payment. Why?

Thanks for the response!

 

To clarify, I thought that you only had to pay taxes on Promotions when a person opens a Deposit Account (Savings, Checking... etc.). This was an Auto Loan, a Credit Account. Is it legal for my bank to declare this as Interest income in this case?

 

I feel it is the same thing as a credit card that pays you cash back for making purchases... They are not sending my 1099-INT forms for this same promotion...

ReneeM7122
Level 9

In August of 2020 I refinanced my Auto Loan. The lender was offering $250 to me as an incentive to refinance with them. They sent me a 1099-INT for this payment. Why?

As to whether it is legal for your bank to declare this as Interest income, TurboTax can't answer this question because legal issues is an out of scope topic.  However, the following may be helpful:

 

Internal Revenue Code I.R.C. Title 26  §61

For federal income tax purposes, gross income means all income from whatever source derived...   Any income, from whatever source, is presumed to be income under section 61, unless the taxpayer can establish that it is specifically exempted or excluded.

 

DMarkM1 is correct. Since the bank issued a 1099-INT to you, the IRS received one also.  Regardless of whether it is interest income or not, and whether or not a 1099 had been issued, it would still be income to you, and the IRS would still want to know about it.  

Hal_Al
Level 15

In August of 2020 I refinanced my Auto Loan. The lender was offering $250 to me as an incentive to refinance with them. They sent me a 1099-INT for this payment. Why?

These kind of incentives are considered taxable income.  The merchant usually  issues a form 1099-Misc and you report it as "other income".  Other income and interest income are both ordinary income and taxed at the same rate.  

They did you a small favor, as interest income is a lot easier to enter in TurboTax than 1099-Misc. The usual gripe we hear, here, is that taxpayer/TT user has to upgrade to enter the 1099-Misc.

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