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Payment of Interest on Time Deposits

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  • #37845
    Emily G
    Participant

    We had a client request for us to pay interest on their time deposit at maturity for a 14 month term. We are trying to determine if we are able to do this, since there is a possibility a 1099-INT would not be reported for one year when the interest isn’t ‘credited’ yet.

    Under 1030.4(b)(6)(iii) it says ‘For accounts with a stated maturity greater than one year that do not compound interest on an annual or more frequent basis, that require interest payouts at least annually, and that disclose an APY determined in accordance with section E of Appendix A of this part, a statement that interest cannot remain on deposit and that payout of interest is mandatory.’

    While reading that, I am unclear if it means that interest for terms longer than a year must be paid at least annually?

    #37857
    kboatwright
    Participant

    My understanding is the same as yours. Interest is required to be paid at least annually. That can mean by depositing the interest into the CD, check, or even an electronic transfer. This method does ensure that 1099-INT will be reported properly.

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