3. Taxes And Earning Interest Under $10

Taxes And Earning Interest Under $10

iracer7
iracer7   |     |   3 posts since 2010

I've got multiple online bank accounts, so the way I see it, as long as you don't earn more than $10 in interest, the  irs will never know about earning the interest. Am I correct about this? I know it won't amount to much, but it will probably amount to a few dollars that the irs won't get when tax time comes around. Anyone else do this or have any advice about doing this?

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me1004
me1004   |     |   874 posts since 2010
You are correct -- the bank does not need to report that to the IRS.
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Ruth
Ruth   |     |   4 posts since 2010
True, the bank does not report interest earned under $10 annually - but why would you want to take the chance for such a miniscule tax liability? If for any reason you are ever audited and this is discovered, you run a very high risk of making yourself a target for a full blown audit covering many years and requiring documentation for absolutely everything reported on your tax returns. Keep in mind that if the IRS suspects fraud, there is no statute of limitations on how far back they can audit you - and anyone who has gone through a full audit knows that invariably they will find something to assess since most people do not have complete backup documentation for all the tax returns they have filed.

 

I would consider this an unacceptable risk/reward ratio even if I did not believe that it was also morally wrong. You may feel differently though and I am not judging you for doing this; I am just pointing out the possible pitfalls of this action.
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Ally6770
Ally6770   |     |   2,793 posts since 2010
I worked in a bank for 30 years. We had customers who lost or did not receive their interest statement and did not claim the interest. They of course were sent the "letter" from the IRS. Several were auditied and paid heavy fines and penalties.

Taxes are due on all interest and banks are NOT REQUIRED to send an interest statement if the interest is under $10. Interest is posted on line and or in your statement. YOU DO HAVE A RECORD.
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