Interest on a car insurance premium refund

[Mark180]

I received an Auto Insurance policy refund from Allstate on 8/24/2023 of $1583.30 by mail.  The accompanying letter said it was one or more policy periods due to a processing error.  Also said the check was for the refund amount plus interest, but there was no indication of what portion of the $1583.30 was the refund and what portion was the interest.  Now I receive a Form 1099-INT from Allstate for interest income of $351.67, which supposedly was part of my refund check.  I called Allstate to ask why the interest amount was so high.  They told me to disregard the Form 1099-INT, because they should not have sent those out for any interest amounts under $600.   They also said they will be correcting this with the IRS.  This sure sounds to be incorrect and strange to me.   I feel that I still need to report this interest income on my taxes, even though Allstate states they are amending the Form 1099-INT with the IRS.  Yeah, but now they already know.  Like they will just forget about it?  I don't think so.  What do you think?  Should I still report the interest income, even though the only way I was informed about the amount, was through this supposedly "issued in error" Form 1099-INT?

[Cynthiad66]

Yes, you should report the interest.  The IRS requires that you report all of your income, even if it's less than $600 and you didn't get a tax form for it.  I suggest asking your insurance company to verify the amount of interest Income so that you will have the correct information if they decide not to issue the form.

A bank, financial institution, or other entity pays you at least $10 of interest during the year, it is required to prepare a Form 1099-INT, send you a copy by January 31, and file a copy with the IRS.  All interest income should be reported on your tax return.

Also, click HERE for additional information about Interest Income

IRS has a short tutorial on certain income and deductions:  IRS Interest Income Tutorial

[Edited February 10, 2024 | 11:14 AM PST]

[Opus 17]

The question for Allstate is, was this the right amount of interest?  If it was, then that's your taxable income.  What they told you was, "we aren't required to issue a 1099 below $600" which may be true, but doesn't mean it wasn't taxable.

The amount that is taxable to you is the amount that is more than the excess premiums you paid.  Insurance companies invest their money in complicated ways, and if they overcharged you $1000 on premiums over a period of time, $350 might be their investment gains even though that's more than simple bank interest.  But only Allstate can tell you how much of the refund is more than a premium refund.