Do we have any IRS reporting obligations if we want to refund the ATM surcharges that other banks charge our customers? Basically, our customers would be able to use their card anywhere without paying a fee.

Per Reg Q, I would say no...it is simply an absorption of fees to conduct banking activities....it is not considered interest or a bonus, thus no 1099 reporting needed.

I agree with Grant, but am curious when the IRS will clamp down on this.

Reg Q deals with the bank waiving its own charges, under the theory it is not income to you for me to simply decide not to charge you a fee I am not really required to charge you anyway.

However, the common interpretation that Reg Q allows you to pay ATM fees to another bank, on behalf of your customer, is logically suspect. Under the same theory, the bank could also pay a customer's high-speed internet bills and more-or-less any third party fee somehow related to banking. That sounds like income.

I too wonder the same thing....I think it is a borderline issue waiting to pop some day.

I wonder too that in the same reg, on the restrictions on premiums, part B. I think the orginal intent of this exception was to benefit premiums on debit cards and such services, but is often being used to offer $25-100 bonus on new checking accounts, and charge them on the back end of they close the account early. How long before this is looked at more closely too?

Actually, to answer the original question, you need to look at the IRS regulations (definition of miscellaneous income) rather than Reg Q. I'm not sure what the answer is because I've never researched it, but the amount may need to be reported on a 1099-MISC if the total refunded to one customer exceeds $600. Again, I'm not sure whether you would be required to report, but I am sure that the IRS regs are where you need to look for your answer. Maybe Randy will see this and give you a definitive answer.

Deena, that is what we are debating...refund of fees does not seem to appear to fall into any of the 1099 definititions, and Reg Q seems to be the only source that remotely deals with it. Technically, is it really income?

Thanks, everyone - think I'll pass this info on to our tax expert for her IRS interpretation - isn't this compliance world fun???