Published on January 31st, 2019 | by Chuck141
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.