First National Bank Account Requirements
Question
Walter Johnson has two accounts at First National Bank. His savings account was opened in 1975, and his money market savings account was opened in
1985.He has never supplied a TIN number to the bank. What must First National Bank do?
Answers
Explanations
Click on the arrows to vote for the correct answer
A. B. C. D.B
Walter Johnson has two accounts at First National Bank, a savings account and a money market savings account. He has not provided a Taxpayer Identification Number (TIN) to the bank. A TIN is a unique identifier assigned by the IRS to individuals and businesses for tax purposes.
Under the law, First National Bank is required to report interest earned on these accounts to the IRS using Form 1099-INT. In order to accurately report this information, the bank must have Walter Johnson's TIN on file.
Option A suggests that the bank withhold 28 percent of the payments on each of the accounts. This is incorrect because the bank is not required to withhold any amount from the payments made to Walter Johnson unless he is a nonresident alien or subject to backup withholding.
Option B suggests that the bank withhold 28 percent of the payments on each account and annually request a TIN on the savings account. This is partially correct. The bank is required to annually request a TIN on the account(s) for which they do not have a TIN on file. In this case, since Walter Johnson has not provided a TIN for his savings account, the bank is required to request it annually. However, the bank is not required to withhold any amount from the payments made to Walter Johnson unless he is a nonresident alien or subject to backup withholding.
Option C suggests that the bank annually request a TIN on both accounts. This is the correct answer. The bank is required to annually request a TIN on any account for which they do not have a TIN on file. Since Walter Johnson has not provided a TIN for either account, the bank is required to request it annually on both accounts. The bank is not required to withhold any amount from the payments made to Walter Johnson unless he is a nonresident alien or subject to backup withholding.
Option D suggests that the bank refuse to open future accounts without a TIN. This is incorrect. While it is a good practice for banks to obtain TINs for all account holders, the bank is not required to refuse to open future accounts for customers who do not provide a TIN. However, the bank must annually request a TIN on any account for which they do not have a TIN on file.
In summary, the correct answer to the question is option C: First National Bank is required to annually request a TIN on both accounts since Walter Johnson has not provided a TIN for either account. The bank is not required to withhold any amount from the payments made to Walter Johnson unless he is a nonresident alien or subject to backup withholding.
