Posted by Chuck on February 12, 2017
Credit Cards

Published on February 12th, 2017 | by Chuck

68

Do Banks Send 1099s for Referral Bonuses?

It’s now 1099 season, and some people have been surprised to receive 1099s on their credit cards due to referral bonuses.

Please consult with your tax advisor for tax advice. This article is for informational purposes only.

Credit card signup bonuses and rewards aren’t typically taxable and don’t usually get 1099ed since they are considered rebates on the purchase, like a discount.

However, if you earned rewards from a refer-a-friend program, that would constitute taxable income. Some checking accounts have referral programs as well, and that will work similarly.

Banks are required to issue a 1099 if the amount earned was $600 or more. Some might send for lower amounts too, though that’s not common. Technically, you’re supposed to report smaller amounts even if the bank doesn’t send a 1099.

Some banks even send out forms for points earned via referrals. If you feel they over-priced the value of the points, you can dispute the amount. Viewfromthewing has more details on how to do that.

ReadCurrent Credit Card Referral Offers

All interest income and bank signup bonuses will get a 1099-INT form, even for small amounts as low as $10. I once had a bank send me a 1099-MISC for a $125 bank bonus, but in any case, they always send some tax form for small amounts too.

Contents

Amex

A report indicates that they do not 1099 for points referral bonuses. Conversely, they reportedly do 1099 for SPG prize bonus points (with a value of 1.5 cents per point). I assume they would 1099 for cash referral bonuses in the amount of more than $600, like for Blue Cash referrals.

For year 2018, Amex did a new thing and sent out Form 1099s for all credit card referral bonuses. They put a value of 1 cent per point on all points (includes Membership Rewards, Marriott, SPG, Delta), with the exception of Hilton which was valued at .67 cents per point. Discussion on that here.

Capital one

Capital One does send out 1099s, even on a referral bonus as small as $20. Note, this may have been a checking referral which might work a bit differently.

Chase

Chase sent out 1099s for referral bonuses made during 2016, at a value of 1 penny per point, but they retracted on that. They then reversed again and sent out 1099s for referral bonuses made during 2018.

Citi

Citi doesn’t currently have a referral program.

The place where people have been getting 1099ed from Citi was for their checking bonuses. All cash bonuses get a 1099, but Citi sends out 1099s even for point bonuses, provided that you received more than $600 in value from the points in that calendar year. You can see a bit more detail here.

Discover

Discover does send out for amounts over $600. They do seem to have a weird math how they compute the $600 so don’t be shocked if you get one for less.

U.S. Bank

U.S. Bank does offer referral bonuses. Data points needed whether they send out 1099s.



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joE
joE

I don’t remember the form number, but there is a form you can send in and dispute the value that the bank has places on each point. As a result you can say these points are collectively worth $100 as oppose to $600 and you’ll be just fine.

I had hope to see that noted in this article since it’s very relevant.

sirtheta

Doing this would almost universally be lying because people get either equal or more value from their points than the bank has stated.

joE
joE

You’re misunderstanding the difference between stated value and used value. What I do and how I use my points is no ones business. And if it was lying the form would not exists, there is a reason why it does.

LC
LC

and this is why they should NOT be sending out 1099 for referrals. this is too confusing and creates a lot of gray areas. Whats going to stop the IRS from coming after us for credit card sign up bonuses next?

Sevillada
Sevillada

For hilton it would be relatively easy to day, for example, 0.02 since that’s what’s worth for amazon ..me thinks

Dylan
Dylan

What if I redeem my amex points for am amex gift card at 0.5cpp, then i should only be taxed at 0.5cpp.

That would be like someone gave me a bar of gold and they reported it was worth 10K to the IRS. If i turn around and sell this bar of gold for $100, then I should only have to pay taxes on $100 since that is all I got for it.

The same thing can be applied to points. If I only get say $500 in value from my MR points, then thats all I should have to pay taxes on (if any).

The weird thing is you arent even supposed to pay taxes on credit card bonuses, they are supposed to be a “rebate” on purchases and not income. and I would be happy to argue to the IRS about that.

CM

That’s not really how it works. If you sell Gold below it’s fair market value (I don’t know why anyone would, TBH, as it’s a commodity), you could probably declare the sale as a loss, but it doesn’t invalidate the fact that you’ve received it as income at the correct market value in the first place.

LC
LC

i argued it with the IRS last year for Chase referral bonus and they quickly retracted and accepted my return. maybe it was because chase sent a corrected 1099 so both parties agreed, and with the serious gray area for credit card referrals, i think the IRS has no recourse and must agree in this case.

Me
Me

Is this something new? I’ve never heard people say before that they get a 1099 for referrals on chase. I got like 20 last year and I’m worried because I already filed my taxes.. i also haven’t received anything yet and it’s 12 days past the due date for them to I get this out if so.

SouthFayetteFan
SouthFayetteFan

I’m the Reddit user who got the 1099 from Chase. I honestly had never heard of this being done before. I’m sure there are other people who got at least $600 worth of referrals in past years. The other strange thing is nobody else on Reddit has chimed in to say they got one too.

I’m certainly not happy about it as it’s messing with my AGI, the ability to fully deduct contributions to my IRA and obviously the tax bill as well. I do extensive tax planning each year to mange things like AGI and tax bills (and if I’d have known this was coming I’d have sold a little less of my mutual fund and kept my capital gains a little lower). But in the end I guess I’ll just swallow hard here and do what needs done. Total impact is about $350 to me (but I still got $1,000 worth of referrals so…I’d rather have net $650 after taxes than have nothing).

Jeremiah
Jeremiah

I got over 70k Starpoints from referrals last year and I did not receive a 1099 from Amex.

Abey
Abey

So far i havent gotten any 1099s.
Meanwhile there is a new Cathay Pacific Credit Card from Synchrony bank:
Earn 25,000 Asia miles after $2,500 spend.
I wonder how much they are worth,
Lets wait for a post from Doc with details.

William Charles

Thanks, just posted about the Cathay Pacific card.

Nick
Nick

Are point bonuses really taxable though? I get it for cash stuff, but in the terms it’s stated that you never own the points. How can you be taxed on something you never once could claim ownership of? I’ll value everything at 1cpp, but just confused on why they are sending these out for points.

chaseaholic
chaseaholic

Already filed and forgot about this haha hope I don’t screwed.

maxed CSP RAF last year, no 1099. Also used a lot of points in a very non-churner related manner and did not receive a 1099 for that either. of course did receive a 1099 for the checking account bonuses.

Lrdx
Lrdx

You are actually not required to file an amended return, if you got new 1099s.

TomTX
TomTX

I am most interested in (avoiding) banks which combine signup bonuses for credit cards and checking for issuing a 1099. Example: earn $300 in cc signup and the same on checking from BoA. Next year, get hit with $600 1099.

Darv
Darv

You might consider clarifying the distinction between 1099-MISC and 1099-INT. The MISC forms are required only if income is $600 or more (note: apparently optional for them to not issue if less than $600). The INT forms are required only if income is $10 or more.

Banks may or may not issue a 1099 in a bonus situation because it depends on how they CHOOSE to recognize the income. From the instructions in 1099-MISC at IRS, it says “prizes and awards.” From my experience, most banks recognize these bonuses as “interest,” and then issue 1099-INTs in those situations. I don’t agree with that interpretation because these bonuses are definitely not interest income. Nevertheless it is common practice.

Going back several years I have received 1099-MISC in situations where I earned less than $600, in other words the bank or firm issued one even when they weren’t required. I’ve also received 1099-INTs for less than $10. This year I received one from Charles Schwab for $0.01.

But if you don’t receive a 1099 and you’re wondering if one was issued but simply not mailed, you can call the bank or firm and ask if one was issued. I would secure message, get it in writing, in case there is an issue with a tax return.

One noteworthy data point: I received my 1099 from Bank of America and it only had checking account promotions listed. They did not recognize any of the credit card signup bonuses as income.

Your above language says that all bank signup bonuses will receive a 1099-INT. That’s not true.

Cheers.

Ramesh
Ramesh

DP: I had referred 4 people for (200$) last year with Arizona bank and trust. Now I have received 1099 tax statement from the bank.

Lrdx
Lrdx

Re: 1099-INT for $10:

I got 1099-INTs for $0.01 from Bank of America and Schwab for 2 years in a row now. Yes, one freaking cent.

Ben
Ben

As @Darv pointed out, definitely get things in writing.

I did not receive a 1099-INT from a $100 Wells Fargo checking account sign up bonus. I SM’d WF and told them the specific date the bonus posted as well as the fact that it was for a checking account sign up bonus. They replied and told me that I had no transactions that qualified for sending me a 1099-INT. Not sure if this is just WF’s policy or if I just got lucky somehow. Either way, I’ve got what I think is pretty good proof that I don’t need to claim it (and I didn’t, just filed today).

The only caveat to this, is that I signed up for the WF checking account in Dec 2015, and earned the bonus in Feb 2016. Maybe this somehow screwed up their system. Also, I did not get the 1099-INT in Jan 2016 for 2015 tax year.

Darv
Darv

Good homework. No you’re all right. The post date of the bonus is what counts and in your case, 2016. If they said no 1099 issued, you’re in the clear.

Emanuel
Emanuel

I open a WF account to get the $100/$150 bonus then close the account last year. Called today to inquire about the 1099. Was told they checked two systems and my account doesn’t show any bonus and my account doesn’t meet the requirements to send 1099.

Matt
Matt

Navy Federal Credit Union included their $50 referral bonus on my 1099-INT this year.

They also had a $200 bonus offer if you re-financed an auto loan with them. I got this $200 bonus from them this year – they didn’t include that on the 1099-INT.

stevej123
stevej123

FWIW….I did the TD bank credit card and checking account bonuses and the HSBC checking account bonus and as of this date have not received any 1099…..all bonuses credited in 2016. An email to HSBC indicated they only issue a 1099 if the account earns $10 of interest or more….. so I guess the bonus is considered something else and is not reported to the IRS.

Does anyone know if its mandatory for Banks to mail a 1099 even if you are signed up for online statements?

L
L

Got 1099 misc from chase for $600. Pretty mad because I already filed and didn’t expect this. Also, I earned way more than $600 from SW points, but they capped it at $600 on the form?

SouthFayetteFan
SouthFayetteFan

Did they appear to value it at $50 per referral? My calculation was that chase values all referrals at $50 so my guess is you had 12 referrals total.

L
L

I had 19 referrals last year in 2016. It just says other income $600.

L
L

I do not see a breakdown of each referral. I guess next year I will count on Chase to send the 1099-MISC form mid February and plan accordingly. It’s still a good problem to have earning all these SW points, albeit a little frustrating dealing with this now.

Frank
Frank

It’s still the case. I just received a certified letter from Chase stating the original amount of $1,000 on my 1099-misc was wrong and the correct amount is now $900. Don’t know why some people are getting theirs wiped out. Really pisses me off since I will now have to file an amended return.

SouthFayetteFan
SouthFayetteFan

Wow…Frank your comment worries me now. I was one of the people who had $1,000 go to $0 (I guess I feel lucky since others didn’t…) but I wonder if this is now final. I don’t want to do an amended return and then they reverse course again.

For you, do you think it’s worth it to do an amended return to get $15 or $25 back or whatever your tax bracket is? I’m personally debating whether it’s worth it for me for $150.

Frank
Frank

No I’m not going to file an amended return. It’s not worth my time or effort to get $30 back. Not to mention I would have to pay someone to do it and I’m sure it would cost much more than that. Besides, Chase seems to have their head up their ass and would probably send me another corrected form requiring me to do it again.

If you’re considering amending your return, I would wait for a while or you may be doing it twice.

Frank
Frank

Also, if you had the whole $1,000 wiped out, you may get more than you think. I believe 1099-misc are subject to self employment tax which requires you to pay more to the IRS.

SouthFayetteFan
SouthFayetteFan

I didn’t claim this as Self Employment Income. I entered it as other income on line 21. Due to the fact that it was reported in box 3 on the 1099-misc and the nature of the earnings does not appear to constitute a trade or business, one can make a case for reporting the earnings as other income and therefore avoid the cost of self-employment tax.

That was my interpretation of this income. So based on how I did my return and the marginal tax bracket being 15% I only stand to gain $150. I think I will definitely sit on this awhile though to make sure Chase doesn’t have another change of heart.

Frank
Frank

Did you use tax preparation software? I used Turbo Tax and there was a whole separate section for reporting 1099-g’s which is for self employment and there is another section for 1099-misc which can be prize winnings, referral bonuses and any other miscellaneous income. Either one I attempted to use took out extra for self employment tax.

In your case it probably doesn’t matter since your 1099 was wiped out and if you were to be audited, you would be getting money back anyway. But to be honest, I’m not a tax expert. I just followed the prompts that Turbo Tax gave me and I could very well be wrong.

SouthFayetteFan
SouthFayetteFan

I used Turbotax this year although normally I just fill out PDFs and send it in. Due to all the bank account bonus activity and some other investing nuances I decided to pay for Turbotax to avoid the hassle.

Turbotax is weird around 1099-MISC. I’m not a CPA but am pretty well versed in taxes. I recall answering a question that the misc income earned (referrals) was not an intent to earn money and that I didn’t earn money in this manner last year and didn’t expect to next year. Truly my intent was just to refer my friends to a credit card I had…am I right? So basically, by answering those questions that way turbotax treats this as other income and not earned income subject to SE Tax (thus saving a nice sum of money).

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