<p>I have seen this reported to clients, on 1099-misc forms issued by their banks (TD Bank and Peoples United Bank, I don’t recall the third bank - the TD Bank one I remember because it happened 2 years in a row, and I convinced that client to stop going to “foreign” ATMs). Again, I can no longer find the link the the IRS guidance that was given in February (so more recent than the 2010 response from the IRS).</p>
<p>This would not be a rebate, though that is what some banks call it. It also is not a waiver of the fees, which would not be taxable. The issue is that the fees are in fact imposed by another bank, and your bank is paying them for you - they are not getting the other bank to waive the fees. Thus as far as the IRS is concerned, it is no different than if your bank gave you $3 (or whatever the fee is), which you used to pay the other bank. This transaction would be covered by a 1099-Misc. It is not a transaction that is exempted by the IRS, so as they have stated, it is presumed to be a taxable transaction.</p>