Posted by Chuck on January 31, 2019
Credit Cards

Published on January 31st, 2019 | by Chuck

141

American Express Sends Out 1099s for Referral Bonuses – Hilton @ .67 CPP, Everything Else @ 1 CPP

[A previous version of this article stated that Amex is valuing Hilton points at 1.25 cents. The article has been updated and edited with the correct number of .67 cents – see this post for more information on that point.]

American Express is sending out Form 1099-MISC for referral bonuses earned during the calendar year 2018. Amex values Hilton points at .67 cents per point, and all other points at 1 cent per point; that includes things like Membership Rewards, Delta, SPG, and Marriott points.

You’ll get a separate Form 1099 for each card you referred from, I believe. Apparently, these are being sent out even for those who did not get $600 total. ($600 is the threshold where they are required to send out the form – assuming this qualifies as a cash value.) They are sending the forms even for points which were not yet used as well.

Note: Only referral bonuses are getting 1099s, not signup bonuses or any other sort of bonus, regardless of how it was redeemed.

In the Amex terms, it states: “The value of the Referral Bonus may be taxable income to you, and we may be required to send you a Form 1099-MISC and file it with the IRS. You are responsible for any federal or state taxes resulting from the Referral Bonus. Please consult your tax advisor if you have questions about the tax treatment of a Referral Bonus.”

You can declare the value of the points different from what the 1099 stated. Consult your tax professional on how to go about making this adjustment. Some discussion about adjusting can be found on Reddit here, including the idea of deducting the income by the cost of the annual fee on the card since that expense was necessary to get this earned income.

Citibank sends out a 1099 for ThankYou points earned from bank bonuses (only), but they evidently send it out based on the year the points are redeemed. This makes sense: anyone who reads the fine print of points programs will see text about how points have no cash value, yada, yada. Indeed, there’s a high number of points which go unredeemed. Also, Citi will value your 1099 based on the actual value you received from the points, not an arbitrary number.

Chase did the same thing in 2017, and they subsequently retracted the 1099. For that reason, the good folks on r/churning are recommending holding off on doing your taxes immediately with the hopes of a retraction.

In Chase’s case it somehow made more sense to 1099 given the fact that it’s possible to actually cash those out at 1 CPP. In Citi’s case, they 1099 you based on actual value received. Amex’s method of, somewhat arbitrarily, giving a value to the unredeemed point and treating it as cash is somewhat troubling.

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Dan - Legal Bank Robber
Dan - Legal Bank Robber

Mayhem, Amex truly knows how to fuck with us.

Matt

Hilton points are *not* worth 1.25 cents each.

TravelingNinjas
TravelingNinjas

1.25 CPP for Hilton? Are they high? What redemption locations get that?

lei
lei

new year eve at time square maybe…

Yuri
Yuri

Even if you redeem it for hotel stay, it’s not cash. I will just ignore those.

Jacob Hurley
Jacob Hurley

If MR is 1 and Hilton is 1.25 they should let me exchange my 1 million Hilton for 1 million MR since it would be in their favor.

I also have at least 125k Hilton referrals last year, so I’m paying in taxes over my value of .3 for Hilton.

Stvr
Stvr

I would like to meet the person who got 1.25 cents out of redeeming a Hilton point and give that person a medal

Brian
Brian

I mean I have in Hawaii over New Year’s on a 5 night stay. It’s hardly the standard and I don’t need your medal!

Brenton
Brenton

Any stay at a hotel like the Conrad Maldives will earn 1.5-2 cents or more per point…

Staradmiral
Staradmiral

I just checked that on my Hilton app. A room costs $517 or 95 000 points per night. that’s 0.54 cents per point.

Roger
Roger

Busy season vs. rainy season.

Doc Lover
Doc Lover

If enough of a backlash maybe Amex retracts the 1099. I know I’ll be calling Amex today to complain.

LC
LC

same putting in formal complaints.

I feel as though we have pretty good ground to argue to the IRS that this is considered part of the credit card benefit and THUS a rebate that is not taxable.

Had i not had the credit card i could not have referred someone to the card. Its part of the decision in whether or not to sign up for the card.

If we let them tax us for this, what will stop them from coming after us for credit card sign up bonuses?

perfectviking
perfectviking

“If we let them tax us for this, what will stop them from coming after us for credit card sign up bonuses?”

The fact that the IRS has declared sign up bonuses rebates, not income.

LC
LC

Yeah so far, this is how it starts…

perfectviking
perfectviking

That’s an action by the IRS, not Amex. Stop panicking.

Lrdx
Lrdx

Referrals are not rebates, you don’t spend anything on your card for them.

LC
LC

define rebate, this is a benefit of the credit card. If nothing else I’ll claim the platinum card annual fee of $550 is deductible since i earned “Referral income” because of it.

B
B

So cards capped at 55k pts a year wouldn’t be at risk.

Jim Jones
Jim Jones

1cent per marriott point seems even more egregious than 1.25cent per hilton point.

DeezButtz
DeezButtz

Nah. Many if not most Ritz redemptions get you 1CPP+ pre-devaluation. For instance, Ritz Grand Cayman sticker was $750 a night when I stayed there for 60,000 points/night. Add to that the 5th night free..

Tom
Tom

Haha you’re funny, good joke!

Zaos
Zaos

1¢ per marriott or SPG makes no sense when they themselves and marriott have specified the conversion rate at 3:1.

TheRightKost
TheRightKost

ya….no

James
James

Marriott is roughly .6-.7 cpp for most reasonable redemptions, Hilton is closer to .3-.4cpp

Ted
Ted

Do you mean calendar year 2018

Sam
Sam

if they can send out 1099s for referrals paid, then i should be able to count as losses all my annual fees paid

LC
LC

yeah they are essentially associating that specific card with the referrals for income (they even put the card account # on the 1099)

No way would i have been able to get these referrals if i did not pay the annual fee on said specific card. In fact, they would shut down my account. So I own these points because I signed up for a card and paid the annual fee. Its all linked and easily arguable as a deduction.

Yoni
Yoni

It almost sounds potentially like fraud on Amex’s part – if Amex doesn’t reimburse Hilton @1.25 cop and 1cpp for average actual room redemption’s for 2018.

I’m guessing this may have to do with Amex’s bad 4th qtr for 2018.

Mike
Mike

So if my “tax advisor” is turbo tax and I already did my taxes based on the assumption that I had everything that happened last year accounted for what do I do with this 1099? Just pay next year? File some sort of ammendment?

I get the standard deduction and basically declare nothing which is why I’m asking on here and not with a tax attorney.

LC
LC

you might give it some time and see if amex retracts the 1099, you will most likely need to send an amendment in. discuss with turbo tax CPA on demand.

Law
Law

Not a tax professional, but I think you’d have to amend the 2018 tax return you just filed to include the 1099.

Mike
Mike

Guess I could file an amendment and overpay by 5000 to hit msr on one of their cards. 🙂

LC
LC

make sure you get a referral for that card so you can do it again next year.

Yoni
Yoni

Better yet put it on the 15 month 0% Amex biz card and leverage the arbitrage.

Alli
Alli

What card is that?

Yoni
Yoni

Alli
Amex Biz Blue+ 15 mo 10K MR
Chase Biz Ink CIC/CiU 12mo 50K UR

off the top of my head

a handful of other Biz cards offer 9mo Wells, BofA, US bank IIRC.

Uncle Sam does pay interest on overpayment of taxes if you have a refund coming. 😉 it’s not very much but he also doesnt send you a 1099-int either.

A lot of room for creativity arbitrage here, but I’ve said far more than I should already.

Ann
Ann

You file an amendment in April if this 1099 doesn’t get retracted before then, or else you will probably get caught by automatic 1099-matching audits. You can’t wait till next year on a 1099 dated for this tax year.

Note that amendments can only be filed the old-fashioned way, on paper.

Burton
Burton

Agree, although getting caught by 1099 matching isn’t necessarily a bad thing and I’d expect to see a notice come out of it saying they reduced your refund by $50 (or whatever) or if you had to pay in then asking for a check for $50+ a tiny bit of interest. If they do this, you end up in the same spot as if you had amended your return except they took care of the calculation for you and you didn’t have to file additional forms.

Jason
Jason

There’s no penalties for improper filing if you go that route?

Dave
Dave

TurboTax has what seems to be e-file of amended return new this year

Celia
Celia

Per Turbo Tax 2018 FAQs:

No. Form 1040X cannot be e-filed per IRS regulations.

After you finish amending in TurboTax, we’ll guide you through printing and mailing your 1040X along with any required attachments.

Artem
Artem

no such thing as e-filed amendments. Need to be signed and paper mailed where someone will manually look over it.

Bill
Bill

Following this thread. I already did my taxes and my refund is already in my bank account. I had a couple referrals for 2018. Do I need to file an amendment?

Artem
Artem

Out of the honesty of your heart you’re supposed to. The 1099s if issued will be known to the government and will catch up to you. They like to give it a few years to rack up interest and penalties imo. If you have a 1099 for it definitely do the amendment.

Artem
Artem

Tax dude here, file an amendment otherwise that 1099 could catch up with your later on with penalties/fines. No statue of limitations for not reporting.

sam
sam

How do we report Amex to the IRS when we earn the referral in one year, yet in a subsequent year, due to Amex changes in rewards values, the values have decreased dramatically and would not have been reported nearly as high in that present year? What do we do when Amex essentially claws the referral bonus back or shuts down the card before the rewards were used because of “abuse”, yet the tax form was sent out already?

LC
LC

The answer to all your questions are: Amex should retract the 1099s as this is not income. Definitely not for the values they gave.

Artem
Artem

Thats not going to happen lol wishful thinking

CongestionCharge
CongestionCharge

Looks like Amex employees have been drinking on the job again

Debit
Debit

1.25 for hilton? They are being assholes on purpose.

Blue
Blue

“Who’s the only people getting Hilton referrals? Fucking churners, that’s who! Go with 1.25”

LC
LC

So, whose with me to give Amex serious crap about this? Just waiting on my 1099s to show up…

Dawg
Dawg

Calm down, we all know you can’t do anything about it. They’ve clearly written in T&C’s that this will be reported as interest. As unfair it may seem like but its clearly communicated before hand and enforced by 1099 forms

LC
LC

calm down? they are the only bank to do this. i guess they are above the law. Chase is 10X the bank Amex is and they retracted it… so, what makes Amex so special. theres many issues about this and something ill fight for until the IRS says i have no recourse.

Leo
Leo

You’ll have a better chance getting a response from Amex than the IRS. I agree, calm down.

Elmer
Elmer

Maybe you can deduct all the useless legal fees you’ll amass when you try to sue them!

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