TIP: It’s that time of year again – when credit unions send out their 1099s to report interest/dividends that members have earned on their accounts. We thought it would be a good time to remind credit unions that if they participate in The League’s Saver’s Sweepstakes® prized-linked savings program, their reporting responsibilities can extend to prizes their members have won, too.
Saver’s Sweepstakes share savings accounts encourage credit union members to save by letting them earn chances to win statewide monthly, quarterly and annual cash prize drawings. Members still can earn interest/dividends on their savings, but the chance to win gives them an additional incentive to grow their account balances.
The League’s ii Release No. 0184 – Saver’s Sweepstakes Compliance FAQs includes this Q&A:
Does the credit union have to report prizes and interest/dividends to the IRS or state tax authorities?
Yes. Saver’s Sweepstakes prizes, and interest/dividends earned on Saver’s Sweepstakes accounts, are tax reportable. Credit union should have systems in place to track these amounts and report them as income by issuing any 1099 or other tax reporting documentation or information returns that are required by the IRS or state tax authorities (for example, a 1099-INT for dividends/interest that total $10 or more in a year, and a 1099-MISC for prizes that total $600 or more in a year).
The Saver’s Sweepstakes Account Agreement says that winners (the primary account holders whose taxpayer identification numbers are used for reporting the earnings on the Saver’s Sweepstakes accounts are reported) are solely responsible for all applicable federal, state and local taxes.
For information on tax reporting in general, please see The League’s iii Release No. 0130 – Annual Reporting Deadlines.