The Internal Revenue Service (the Service) recently released PLR 201310043 (December 11, 2012), which addresses account - opening bonuses credited to an individual retirement account (IRA) or section 529 college tuition savings plan. A financial services firm – which offered and credited the bonuses to the accounts of new customers meeting specified requirements – inquired whether it had a tax reporting obligation with respect to the bonuses.
- The Service’s limited prior guidance regarding this common industry practice includes a pair of 1987 private letter rulings (PLR 8722068 (March 3, 1987) and PLR 8732004 (April 27, 2007)), Rev. Proc. 2000 - 30 , IRS Publication 17 and IRS Publication 550.
- For IRAs, the Service conceptualized the bonus as interest or other earnings (e.g., a dividend) paid on the IRA, and ruled that the firm had no reporting obligation either under Internal Revenue Code § 6041 pursuant to a statutory exception for such payments ( § 6049(b)(2),(4) ) or “any other information reporting requirements of the Code.” Although not explicitly addressed, the implication of this ruling is that the bonus (i) is not taxable to the IRA owner until distributed and (ii) does not count against the IRA annual contribution limit.
Please see full alert below for more information.
Firefox recommends the PDF Plugin for Mac OS X for viewing PDF documents in your browser.
We can also show you Legal Updates using the Google Viewer; however, you will need to be logged into Google Docs to view them.
Please choose one of the above to proceed!
LOADING PDF: If there are any problems, click here to download the file.