Posted by Chuck on January 31, 2019
Credit Cards

Published on January 31st, 2019 | by Chuck

49

American Express is Valuing Hilton Points at .67 Cents, Not 1.25

Multiple reports on Reddit have made clear that American Express is actually valuing Hilton points at .67 cents per point on the Form 1099MISC, not 1.25 cents reported earlier today. 

The 1.25 cent valuation was really just coming from one report, they probably didn’t realize how many referrals they had. Many reports are now coming in with the .67 cents valuation. (1, 2, 3, 4, 5)

This makes much more sense – it’s illogical that Amex has some crush on Hilton points with the 1.25 cent value, more than all other currencies. Conversely, the .67 cent value makes perfect sense, in line with what’s apparently known that Amex limits people to 82,090 points per year since that equates $550 which is Amex’s max referral bonus per card per year.

Here’s an image with a Form 1099 of $402 which wouldn’t make sense with a 1.25 cents valuation  no matter how you cut it, but makes perfect sense with a .67 cents valuation of 60,000 points (3 referrals).

We’ll update the original post.



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Dylan
Dylan

I still value them at 0.5cpp anyway and will be adjusting my taxes accordingly.

readerS
readerS

Don’t hang your luck with IRS for just 0.16 difference.

calwatch
calwatch

OTOH the penalty and interest on such a minor misstatement is about the same as credit card interest. What will happen is that the 1099-MISC will not be accounted for and the return will get kicked back, so it’s up to you whether you want to have your refund delayed.

NinjaX
NinjaX

yea but its also about being audited up your anal hole for the rest of your returns dating back 3-6 years and the IRasseS have 10 years to collect it.

Rob
Rob

Just put it in at the full reported value so you don’t get a matching error and then make a negative income item for whatever reduction you think is appropriate in other income.

Ferris
Ferris

Put in the full value and then use a deduction for the mis-calculation.

Zac
Zac

I value Hilton points at .42 CPP or less.

Jacob Hurley
Jacob Hurley

I personally put them at .3 CPP. I’d love if I could get even .5 CPP cash for my Hilton, be overly giddy if they would honor this outlandish .67 cpp.

nate
nate

i probably made 30 referrals, at 20k each over the last year across a number of cards that my wife and I had. it might have been my biggest mistake to date and ill be paying for each referral. i don’t even value these points at .20, let alone .67

Debit
Debit

How did you do 30 referrals?

MoreSun
MoreSun

Well if they have a P2 it would be possible with all the flavors of HH.

nate
nate

You could get four referral bonuses per card. between the two of us, we have 4-5 hilton amex cards each.

Jason
Jason

Too bad you can’t sell them to me. I would gladly buy them at .2cpp. Though this is frustrating, exaggerating doesn’t accomplish anything.

Debit
Debit

Should be less than 0.5. That’s what hilton sells it at.

gary
gary

can folks put some DP when they get a 1099. What $ amount triggered the 1099? I havent received one and i only had one referral so trying to figure at when amex is sending them out. What is the lowest amount received on a 1099 so far. Have seen nothing less than $402 posted so far. based on .67 and the one 25,000 point referral post i received it would equate to $167.50

jenninTN
jenninTN

my husband got one for $150

shulem92
shulem92

i received a 1099 for $150

gary
gary

Haven’t received anything yet. but they have till tomorrow to mail it out

Daniel
Daniel

I have two Am Ex Hilton Honors cards that I receive points based on my spending. I got no Hilton Honors points welcome bonuses. I figure between the two cards in 2018 I charged about $2,500, so that would mean I got about 7,500 points during last year. Should I expect to receive a 1099 for $50.25? I haven’t received one yet and in the past years I have never received one. My taxes are ready to mail off but I guess I had better wait another week to see if a 1099 for my Hilton points arrives in the mail.

Daniel
Daniel

Are these 1099s being sent out only for referral bonuses or are people getting 1099s for regular monthly spending on the cards?

Are credit card rewards taxable?

The topic of taxation when it comes to this stuff is an interesting one (let me say upfront that I’m not a tax professional, and this is just my take). As a general rule of thumb, airline miles, hotel points, and credit card points aren’t taxable. Typically you’re only on the hook for taxes on points if they’re won as a prize (like if you win a sweepstakes), or if they’re an incentive that isn’t a rebate.

That last point can be confusing. Generally speaking credit card rewards are considered rebates, since you’re earning them for spending that you’re putting on credit cards.

However, when you earn a reward for referring someone to a credit card, arguably that’s an incentive that isn’t a rebate, since you don’t have to spend anything to earn that reward.

At the same time, historically these types of things typically haven’t been taxable, or at a minimum, 1099s haven’t been issued for them. The exception is several years back when Citi issued 1099s for the miles they offered as part of opening a checking account.

VL
VL

Daniel, nothing to worry for you. 1099s are only for referral bonus. Not for the sign up bonus, not for the regular spend. Those 2 are forms of a rebate which are not taxable. Only with referral bonuses you get the points virtually “for nothing”. Hence, taxable.

Ron
Ron

I got my 1099 today for $134, some petty shit from Amex here lol

Jim
Jim

I value 10 Hilton points for 1 cent. Most standard room at any Hilton that cost $110 in cash start at 45k points or more

JV
JV

So you saying you will claim extra income in excess of your 1099?

VL
VL

How is it “10 points = 1 cent”? Even with your own example in the next sentence it comes down to 2.44 cents for 10 points?

Making invalid claims removes any credibility and value from your complaint, which would be valuable to some degree if you made a correct statement.

sam
sam

in real world when you redeem points at most of their hotel for standard room, the cash rates are around $150 and points rate are 45,000 a night or more.
Therefore, 10 hilton point is worth 1 to 2.44 cents the max. incredibly low value!

syn999
syn999

bitcoin save all my 1099

JK
JK

I thought rewards points are generally considered to have no cash value, and the rewards programs themselves can be modified or discontinued at any time. So unless a company guarantees the value of its points, such as a cash out option at a fixed rate, how can they issue a 1099?

Are they going to start issuing 1099s for capital gains and losses when actual redemption values don’t match the stated value of the 1099? If they state that points do have an actual cash value, can they legally stop me from buying, selling, or transferring points on the open market like any other cash equivalent? If points have a taxable value, could Amex be legally forced to compensate program members if they or their partners decide to change or devalue rewards programs in the future?

This is a can of worms I’m not sure Amex should want to open up.

VL
VL

Great points, JK!!!
The most useful comment among all the crying!

What we all should do is to call Amex. Ask for a manager, or as high as we can go (cause the regular CSR would just listen and suck our complaints up as they are instructed to do) and present our complaints in the organized, well explained form as you just did. We have seen many examples as people’s outrage changed the decisions (Chase and Southwest are among them)

I would even recommend people to just read JK’s statement… and request that Amex logs a formal complain. Create as much noise as we can in hope that they retract as Chase did (although in all fairness Chase’s points DO have a cash value – you can just cash them out and keep cash).

William Charles , would you create a separate post with the proposed text to present to Amex in the form of complain? I would call, chat and/or mailed it to them. This 1099 story devalues the bonuses significantly. Often we go for a referral in connection with the lower sign up bonus. I mean, there are rules in the game and it is OK with me… as long as those rules are made official BEFORE the game starts. I do not think they told us that all referral bonuses will be 1099ed… I would not do some of them. In my case I reimbursed a friend $50 he lost for not going through “dummy” booking and instead used my referral. 20K Hilton for $50 is one thing, but minus taxes is not worth it at all. I will survive just fine, but I would like to see a push back for the sake of future bonuses, and possible reversal of 1099s for 2018.

Thank you all in advance!

Steve
Steve

Fake news

LC
LC

Just opened a case to Amex regarding this. Two parts of it I was arguing… Amex is the only bank to send out these for referral bonuses, especially less than $600. Chase used to but retracted this, i wanted them to know they are going to make a lot of customers upset if we have to refile because of this..

Additionally, I wanted to let them know im disputing the amount they are claiming the points are worth. Used the statement credit of 0.6 for MR and Hilton worth 0.2 on amazon as comparison. More than anything i just want them to know that we are not ok with this and to have their legal team review. Enough people does it and we might have a chance of them retracting…

LC
LC

and also amex cant take away my points because its my property… they are opening up a can of worms i dont think they want apart of.

pizzywoah
pizzywoah

You always this extra?

Lc
Lc

Yes. It’s America so I’m allowed to complain 😉

LC
LC

looks like complaining is getting me somewhere. I got a personal email address for their special request team. im hesitant to share it here. Will let you know my outcome.

VL
VL

In complete support of your actions. Will do the same.

In loyalty programs T&C it is specifically stated that the points have no cash value, can not be resold, etc…

And yes, for MR points (which can be used as a statement credit – still not cash and can NOT be resold) they are using 0.6 as value themselves.

Also not 100% sure, need to read more their T&C, but I think Amex states that they have certain rights in regards the points, can discontinue the program. There were cases when they froze the points, or even closed somebody’s cards.. which would make all points being lost. It’s basically their property until redeemed…. hence should not be taxed at least until redeemed.

CtownBin
CtownBin

This is quite a fascinating situation. I’m no tax expert, but I am pretty sure that AMEX gets to deduct whatever amount is now taxable to the customer. The question is- even though AMEX is not REQUIRED to send 1099s for amounts under $600, do they need to do so in order to deduct it themselves? If not, then it is baffling as to why they would send us these 1099s for under $600 if they’re not required to, they’re just wasting resources and ticking off customers to boot. As noted, Chase has long since retracted this practice of sending 1099s for amounts less than $600.

VL
VL

I doubt they need those 1099s to deduct expenses.

For example, at my work we send out commission payments to many agents… all funds we paid out is our expense for our bottom line. But we send 1099s only for $600+. Even if the income is less than $600 the payee still has to file it as income without receiving 1099. It is a payee’s responsibility. IRS just does not require the payer to report that to IRS to avoid the avalanche of filed 1099s… 1099 is just a notification to the payee that payer reported it to IRS.

So, I am almost sure Amex can deduct any expenses whether they send 1099s to us or not…

Completely baffled by the fact WHY they decided to do so, since they clearly did not have to. I thought restricting the referral bonuses to $550 was done ONLY so they do not need to send out 1099s and piss off most loyal customers who refer.

Would be interested in professional opinion.

P.S. Though those 1099s may support their cause when they evaluate the points cost on their side.

Burton
Burton

You are correct. If otherwise, a business that deals with multiple vendors in small amounts wouldn’t be able to deduct any of their expenses. The $600 threshold is purely to reduce administrative burden (at both IRS and small businesses).

David
David

I’m confused, why are you guys receiving a 1099 for credit card related rewards? Is this from transferring AMEX MR to Hilton Points or something?

Burton
Burton

I think the issue is the reward isn’t for using your credit card (which would be a rebate and clearly tax free) but rather for referrals. An amount of value (regardless of $, points, or physical merchandise) paid in exchange for a service is generally taxable income.

VL
VL

Absolutely true… the only question is evaluation… and the fact they did not have to do it since it is all less than $600.

Also Hilton T&C state specifically
12. Rewards cannot be redeemed for cash, prizes or credit..

Not sure if it makes any differences. Probably not – compensation is a compensation.. even if given in a form which can not be monetized. But the value can and should be argued.

LC
LC

absolutely. you arent committing tax fraud by disputing what you received. Just be prepared to have documents in case they ask for proof of the valuation determination. If one can specifically quote that programs, or even stronger if its Amexs terms, then i dont see how the IRS doesnt accept it.

james
james

What if you signed up for the credit card using EIN, does that mean that the 1099-MISC is under EIN and for people who generate EIN only for credit card bonuses means they have to file a return for the EIN

VL
VL

Nope. I have my Hilton Biz card under the EIN, and got my 1099 under my SSN.. I guess they 1099 a person anyway, which kind of makes sense in its own weird Amex way. The referral bonus points are posted to the person’s account not the business account. So regardless to whom the card belongs the “earnings” reported to IRS are for the person.

VL
VL

Another interesting case is SPG vs Marriott referrals.

I had 1 pre merge SPG referral = 7.5K SPG points, and 2 post merge SPG (read Marriott) referrals = 20K Marriott points each… guess what – they evaluate each point at 1 cent regardless if it is SPG points or Marriott points… So my 1099 is for $475.
I almost want to make my case as it is clearly wrong, but aftaid that they will say “Ok”, re-evaluate SPG points at 3 cpp and send me corrected 1099 for $625 🙂

gary
gary

Still haven’t received anything. I definitely got the referral bonus in June at what point do i simply file without it? I’m not going to ask them if they sent it out. I only had one referral but from other dp. people seem to be getting them even for one.

VL
VL

In the same boat for P2. She got only 1 Hilton referral of 25K. I got my 1099s already.. but she has not. My concern is if they send it out for everybody and you file without it IRS will most likely flag your return as incomlete, which may result in the audit of this and possibly previous years. I do file my taxes fairly, but would I want that to happen or rather pay taxes for extra $167.50? The answer is pretty obvious for me… so I will wait and will probably call and ask about it.

Still going to file complains and try to pursue Amex to send corrected 1099s for lower amounts.

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