Should I need to pay tax for interest from Money Market Accounts?

[halfgeek]

Sorry, if the post seems stupid...
I'm 24yr old and just started savings....

I heard some where that I need to pay taxes for the intersest earned too. Is that the case for the interest earned from money market accounts like ING ED too?

[Ima saver]

Yes, you have to pay income tax on any interest that you earn. Your bank will send you a form at the end of the year! It is called a 1099 form, I think!

[Mathew Green]

Originally Posted by Ima saver

Yes, you have to pay income tax on any interest that you earn. Your bank will send you a form at the end of the year! It is called a 1099 form, I think!

Definitive Answer:
http://www.irs.gov/taxtopics/tc403.html

(Subject to change, as all tax laws always are)

[halfgeek]

thanks a lot for the info!....

love this forum!

[greedy4chips]

Doesn't the interest earned have to be at least $10 before you are issued a 1099? Or is it $10 minimum before you have to pay taxes?

[disneysteve]

Originally Posted by greedy4chips

Doesn't the interest earned have to be at least $10 before you are issued a 1099? Or is it $10 minimum before you have to pay taxes?

You have to report and pay taxes on ANY interest but the company doesn't have to issue a 1099 unless the amount is $10 or more. Same for stock dividends.

The only exceptions I can think of are if your account is a retirement account or if the money market account is tax-free.

[halfgeek]

What is Backup withholding.
I have signed up for an ING Direct account and it I haven't checked that option. coz it says If i checked that option, ING would send 28% of interest direct to IRS.
So, haven't checked. Is it anything I need to worry about?

[sweeps]

Backup withholding is ordered by the IRS when something is not right with your tax status -- for example if you were caught not claiming interest income in the past. If you've never heard of it, then it's nothing to worry about and you should not check the box.