Video transcript below.
Well I got my 1099-INT from CIT Bank so you know what that means.
It’s tax time and if you signed up for one or two or three of the many high yield savings accounts you’re probably also starting to receive your 1099 forms as well
And if you haven’t received one yet then one of two things could be true:
- Your 1099 is on the way and just hasn’t made it to you yet.
- Or 2, you didn’t earn enough interest for your bank to have to send you a 1099-int.
- [Or 3, your 1099-INT may be available online. This was the case for our American Express HYSA.
That’s right per the IRS, “You should receive Copy B of Form 1099-INT or Form 1099-OID reporting payments of interest and/or tax-exempt interest of $10 or more. You may receive these forms as part of a composite statement from a broker. You must report all taxable and tax-exempt interest on your federal income tax return, even if you don’t receive a Form 1099-INT or Form 1099-OID.”
So if you’re filing taxes and you don’t get a 1099-int form from your bank for any of the interest you earn, that does not mean you don’t have to report the interest you earned even if its a few dollars. I would, better safe than sorry even if IRS never audits me, it’s just one of those things I might as well do. This will help me get a better understanding of how earned interest is factored as part of my income.
Which is something you should understand, because I get this question quite a bit, how much is the interest I earn in a savings account taxed?
And the answer is whatever you’re tax bracket is. Your income tax bracket determines how much you can expect to be taxed on savings account interest.
If you’re in the 22% tax bracket that’s what you’ll pay on your savings interest 24% that’s what you’ll pay 32%, That’s what you’ll pay and so on.
Now, if you earn below the standard deduction, which means you don’t have to file, but you may want to because if you had money withheld from your income over the year well that’s money that you would not be able to get back because the IRS doesn’t just automatically issue refunds without a tax return. If you want to claim a tax refund, get some credits then you should file a tax return or at least talk to a tax professional. Depending on your income level you could qualify for free tax advice with the IRS Volunteer Income Tax Assistance (VITA) and the Tax Counseling for the Elderly (TCE) programs who offer free tax help for taxpayers who qualify. These are great resources that you can use if you qualify. Otherwise, whoever you’re go to is for tax preparation would be your best bet.
So don’t forget to include those 1099 INT forms when you file taxes and for anyone, wondering if having a high savings account is still worth it well I can tell you we still have ours and have no plans to change that especially when we are earning a 5% APY.
