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Ally No Penalty CD Tax Reporting

Glory50
  |     |   2 posts since 2020

Hello all, I had opened up two no penalty cds at Ally this past August 2019. The CDs mature in July 2020. I just printed my 1099 INT form from Ally, and they didn't include the interest I've accrued in 2019 from them. This is my first experience with the no penalty CD, am I supposed to be reporting the 2019 interest on my return?

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111
  |     |   672 posts since 2019
This curiosity has nothing to do with no-penalty CDs or with Ally - it has everything to do with the fact that your CDs have a term of less than 1 year. For CDs (no-penalty or not) with a term of less than 1 year, the IRS says banks and CUs have the option of paying all the interest at maturity. Not that they must - they simply have that option. So if one has CDs of less than 1 year whose term crosses a year boundary, one gets the results you got.

Same thing happened with my Ally no-penalty CDs bought 6/2017 and matured 5/2018 - they were not on my 2017 1099. All interest from them was on my 2018 1099, and were part of my 2018 taxable income.
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7
CTM
  |     |   179 posts since 2010
If you click on a CD from your account snapshot, you will get a new window.

Look at the lower left-hand side and you will see a link (in blue) called "Pay My Interest". The value displayed is likely "At maturity". If you click on the link, it will give you a menu of other choices.

As 111 noted, this is because of the IRS treatment of CDs (or other interest bearing instruments) with a maturity of 1 year or less. This is a useful feature to shift taxable income into the next tax year.
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4
Glory50
  |     |   2 posts since 2020
Thank you! I did not know about the IRS treatment of short term CDs. I appreciate your responses.
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2
GH1
  |     |   1,055 posts since 2017
In the year it matures you will pay the taxes
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2
Duck
  |     |   111 posts since 2010
Is your interest in la-la land or posted as mine has always been @maturity with them maybe someone else will chime in but hasn't Ally always posted when redeemed either early or maturity I didn't do these no penalty
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1


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