JusticeForAll
(1000+ posts)
Send PM |
Profile |
Ignore
|
Sun Jan-16-05 08:37 AM
Original message |
Consumer Fraud Alert: Beware Banks bearing "free" gifts |
|
Edited on Sun Jan-16-05 09:21 AM by JusticeForAll
Edited to specify it is a DVD player, not a CD player...sorry.
Maybe I should have known there is no such thing as a free lunch. In July 2004, I opened a bank account at a local bank (Compass Bank) offering a free DVD player.
I opened the account and got the DVD player, and just two days ago I got a tax notice from this bank. Apparently I have to report $60 in interest income as a result of this gift. This 60 dollar DVD player retails for $25 (probably even lower at WalMart).
I am really pissed. Should I have known better? or does this seem like fraud to anyone?
Please share your stories...I'm wondering how prevalent this is and what people have done to combat it.
|
MSgt213
(1000+ posts)
Send PM |
Profile |
Ignore
|
Sun Jan-16-05 08:49 AM
Response to Original message |
1. Should you be mad at the bank or a tax system that requires them and you |
|
to report such a small gift that turns out not to be a gift at all. If the thing retails at Walmart for $25 or less, what did Walmart pay for it $3 to $9? Besides the bank is probably gaming the system to by reporting it for what it possibly could be sold for and not what they actually paid for it.
|
Spinzonner
(1000+ posts)
Send PM |
Profile |
Ignore
|
Sun Jan-16-05 08:51 AM
Response to Original message |
2. What's your marginal tax rate ? |
|
How much additional tax will you be paying on this additional 'income' ?
|
JusticeForAll
(1000+ posts)
Send PM |
Profile |
Ignore
|
Sun Jan-16-05 09:10 AM
Response to Reply #2 |
6. Good question...but really it does not matter what my rate is |
|
It's the principle behind it all.
I did not work for most of 2004 and did not earn enough in interest income to probably even report the "gift" of $60. I think the threshold for reporting interest is $400?
The fact that this is being touted as a free gift seems deceptive and criminal.
|
Spinzonner
(1000+ posts)
Send PM |
Profile |
Ignore
|
Sun Jan-16-05 03:43 PM
Response to Reply #6 |
16. If you won prizes or money on a quiz show |
|
you would owe taxes on them also.
How is this different ? You receive goods or services in lieu of money to acquire them yourself.
If they weren't taxed, people with the means and/or motivation to do so would use non-monetary transfers to evade taxes. That's why even bartering for goods/services is subject to tax.
|
Hamlette
(1000+ posts)
Send PM |
Profile |
Ignore
|
Sun Jan-16-05 08:57 AM
Response to Original message |
3. how is the bank gaming you |
|
the bank doesn't get anything, we all do when you pay your fair share of taxes :)
There was probably some fine print that told you the value of the "gift" would be treated as income. Banks are not in the business of giving gifts. They are in the business of making money. The CD play was not "free". They will get their money back from you some how.
Uncle Sam is protecting all our interests by collecting taxes on this income deferment. (You get the CD now instead of a higher return on the money you have in the bank...on which you would pay taxes.)
|
rfranklin
(1000+ posts)
Send PM |
Profile |
Ignore
|
Sun Jan-16-05 09:02 AM
Response to Reply #3 |
4. Get real...the bank is scamming consumers |
|
They know that almost no one reads the "fine print" and certainly no one expects to pay tax on a piece of crap electronics. It is intended to make people think that they are getting a benefit for depositing their money. It's dishonest.
|
AP
(1000+ posts)
Send PM |
Profile |
Ignore
|
Sun Jan-16-05 09:10 AM
Response to Reply #3 |
5. The bank might be declaring the fair market retail value as a tax.... |
|
Edited on Sun Jan-16-05 09:10 AM by AP
...write-off, even though they only paid a lower wholesale price for the toaster.
If they do that (and I don't know tax law, so I'm just guessing) they could be getting a big tax break for handing out CD players they claim are increasing in value while forcing customers to pay federal tax on the inflated values.
However, I'd be surprised if they did that. However, I'd also be really surprised if they paid 60 bucks for the CD player. So something is going on.
|
JusticeForAll
(1000+ posts)
Send PM |
Profile |
Ignore
|
Sun Jan-16-05 09:18 AM
Response to Reply #5 |
|
You nailed it on the head. This is my problem with the whole thing. They are profiting from this through a tax break and passing the actual cost onto the consumer. By the way, here is the DVD player. (I feel a bit ridiculous calling it a CD player, sorry). It is retailing for $38 on Amazon. I've seen it on sale for as low as $25 though. It's tiny and cute and does what it's supposed to do at least. :) http://www.amazon.com/exec/obidos/tg/detail/-/B0000A0AJH/qid=1105884885/sr=8-1/ref=pd_csp_1/104-7732298-1027930?v=glance&s=electronics&n=507846
|
Hamlette
(1000+ posts)
Send PM |
Profile |
Ignore
|
Sun Jan-16-05 09:25 AM
Response to Reply #7 |
8. federal tax law requires you to pay tax on the full retail value |
|
of the gift
the bank can write off the cost of the gift, NOT the full retail value.
It is a form of advertizing. As a former business person, I wanted to gain more from my advertizing in sales than it cost. That's how I made a profit. If I didn't make a profit I couldn't hire workers and I went out of business.
Not all business is evil. Not all business practices are evil. I would NEVER suspect that the "gift" offered to me would not come without a cost. Especially from a bank...or my sister.
|
JusticeForAll
(1000+ posts)
Send PM |
Profile |
Ignore
|
Sun Jan-16-05 09:31 AM
Response to Reply #8 |
|
You are a business person...We are talking about the average consumer. This is a rip off, especially when advertised as "free".
|
tx_dem41
(1000+ posts)
Send PM |
Profile |
Ignore
|
Sun Jan-16-05 09:36 AM
Response to Reply #9 |
10. Surely, you don't mean to imply that the average consumer... |
|
isn't smart? I would hope, just like the lottery, everyone knows that winnings (either in money or in products) are taxable.
|
Hamlette
(1000+ posts)
Send PM |
Profile |
Ignore
|
Sun Jan-16-05 07:36 PM
Response to Reply #9 |
17. you believed it would be free? |
JusticeForAll
(1000+ posts)
Send PM |
Profile |
Ignore
|
Mon Jan-17-05 11:13 AM
Response to Reply #17 |
18. Of course I did! That's the point hon! |
|
Sorry to drag an apparently dead horse through the mud, but if this sort of practice is to be so expected, legal, and prevalent then why are we not taxed on the free gifts that cosmetics counters provide or the free room deodorizers that come with purchasing the heavily-advertized Sharper Image Ionic Breeze? How do "they" get away with this practice but not a bank?
It all seems the same to me. The Bank gets use of my money (on a zero percent interest bearing account), I get the "free" DVD player.
(and to another post) We are not taxed on all our winnings from gambling. Lottery winnings and gambling winnings have to reach a $1200 threshold before those are taxed. Why should someone expect a piece of crap electronics to be taxed?
By the way, I do appreciate all of your responses here, Hamlette and others, but I think Democrats should be concerned with protecting the interests of the consumer, not the interests of businesses deceptively trying to generate business by offering things for free and then tacking the bill on when tax season comes.
|
Hamlette
(1000+ posts)
Send PM |
Profile |
Ignore
|
Mon Jan-17-05 12:08 PM
Response to Reply #18 |
19. your examples are "free with purchase" |
|
the "price" of the freebie is included in the exorbidently overpriced cosmetics and, I assume, Ionic Breeze.
I'm not trying to support the bank, I think the bank should have informed you of the "cost" of the gift. When I received a "free gift" from my bank, I was told I would have to pay taxes on the retail value of the "gift." I wouldn't be surprised if your bank did too because my guess is banks have to tell you. (Happens on game shows too. Winners have to pay taxes on those "wonderful prizes" they win. A friend of mine one some stuff on a game show when we were in college. He either had to sell the stuff or turn it down when he was told what the taxes were. Remember Oprah's big car giveaway and the "outrage" when they learned they have to pay the taxes?)
I do support the tax policy that taxes gifts. This is such a small example so think of it in larger terms (you boss paying you in goods and services instead of wages) and you better see the picture. If you didn't get the "free" DVD player, you would have gotten interest (assuming you are a smart shopped) and paid income taxes on that interest. Instead, you elected to go to a bank that gave you a DVD player instead of interest. If you don't pay taxes on the DVD player you are cheating on your taxes.
I'm a firm believer in paying my fair share of taxes. It is NOT my money, it's more like my Visa bill for all of the services I have used which were provided by the government.
You recognize that the DVD was in exchange for interest so you knew it was not "free." And you also know there is no such thing as a free lunch.
|
AP
(1000+ posts)
Send PM |
Profile |
Ignore
|
Sun Jan-16-05 09:39 AM
Response to Reply #8 |
11. But the bank is claiming the gift it the equivalent of 60 bucks in... |
|
...interest they would have paid to the account.
So, is this the amout they'll list on the 1099-I (or whatever the form is) that they report to the federal gov't as your interest income for the account?
Now, I'm totally sure that the bank claims all the money they pay out as interest every year as a tax deduction against their income.
So the question is, are they keeping a second entry on the ledger where they add back the difference in wholesale cost of the toaster and the amount their saying it was worth in interest for the account?
I must have this mixed up. The toaster almost certainly can't be considere the interest they're paying out on the account, right? It's just a gift, and its value is not included on the 1099.
|
JusticeForAll
(1000+ posts)
Send PM |
Profile |
Ignore
|
Sun Jan-16-05 09:49 AM
Response to Reply #11 |
|
they list it under account type "Gift", and have Box 1 filled out as Interest Income.
|
AP
(1000+ posts)
Send PM |
Profile |
Ignore
|
Sun Jan-16-05 10:05 AM
Response to Reply #13 |
|
Edited on Sun Jan-16-05 10:07 AM by AP
Does the bank write-off the amount they claim to give you in interest, or just their cost of aquiring the toaster?
They certainly write off the cost of aquiring the toaster as a business expense.
I'm sure they don't take a second deduction for the same toaster for the Int payment. So maybe they don't.
This is one of the few times in my life I have thought it would be interesting to be an accountant.
|
Hamlette
(1000+ posts)
Send PM |
Profile |
Ignore
|
Sun Jan-16-05 11:32 AM
Response to Reply #11 |
15. they claim all the money the SPEND |
|
Edited on Sun Jan-16-05 11:34 AM by Hamlette
if they give you $100 in interest, they deduct $100 from their profit.
If they give you a DVD player, they deduct the COST the bank paid for the DVD player, not the full retail value of the DVD player ($60 in this example.)
If anyone is scamming you, its the tax man. It's in the tax code. You have to pay taxes on the full retail value, not what it cost the bank.
Trust me. This is something I know about. I'm a lawyer and I asked another lawyer who represents banks (and has been listed as one of the top lawyers in America for the 3rd year running (there are only 12 lawyers in my state who were so named) my husband. He does well and I do good :) (I do welfare and unemployment law.)
|
lectrobyte
(1000+ posts)
Send PM |
Profile |
Ignore
|
Mon Jan-17-05 12:12 PM
Response to Reply #3 |
20. If the bank is reporting a $20 DVD player as $60 of interest paid on |
|
your account, then they are scamming someone somehow... Seems like it would fall into advertising or other business expenses.
|
radwriter0555
(1000+ posts)
Send PM |
Profile |
Ignore
|
Sun Jan-16-05 09:43 AM
Response to Original message |
12. JOIN. A. CREDIT. UNION. Commercial banks are criminal in nature |
|
and just wretched, evil and horrible to deal with.
|
DU
AdBot (1000+ posts) |
Sun May 05th 2024, 08:13 AM
Response to Original message |