529 News

IRS says bonus paid to open a 529 is a 1099 event

(March 15, 2013) - In PLR 201310043, the IRS informs a financial services company that an account opening bonus of $600 or more paid by the company into the 529 account of a customer must be reported to the customer on Form 1099.

The IRS views the bonus payment as a two-step transaction: (1) payment of cash to the customer (income subject to 1099 reporting), followed by (2) customer funding of his or her 529 account.

A similar type of bonus paid to a customer opening an IRA is not subject to 1099 reporting. The IRS distinguishes an IRA from a 529 plan and cites statutory authority for exempting the IRA bonus from 1099 reporting requirements.

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