My Thoughts & Questions For Your Accountant On Those 1099’s
A few weeks ago people started getting 1099’s in the mail from American Express and Chase. These were based off of credit card referrals. If you referred a friend, or yourself, and received a points bonus for it then you should have received a 1099 for it. Most of the points were valued at 1 cent a piece, besides Hilton points. I am NOT an accountant or a tax professional but I have some thoughts on it. I also spoke with someone who is more in the know on these things. This piece is intended to give you some ideas of topics to speak with your tax professional about. This IS NOT tax advice, you still need to discuss this with a professional.
My Thoughts & Questions
I brought this situation up to someone who knows a lot more about the tax code than I do. The first question I was asked is which box was filled out on the 1099. If you look at the ones you received you will see that box 3 is filled out. I had assumed these would be treated like bank bonuses which are in box 1 on a 1099-INT. My friend seemed pleased that the items were in box 3 on the 1009-MISC. Here is some info on what usually ends up in box 3 and why it is taxed less than regular income.
When I asked my friend why they thought these would be coming out now they said that the IRS is putting the screws to banks and credit card issuers. There was little to no 1099 filing previously because it was hard to value some points. The IRS seems no longer willing to overlook these.
My friend also said if they are transferable or can be converted into cash they require 1099 reporting. I followed that up with a question of my own. If they are not transferable or convertible to cash should they be claimed? My friend said that if they are transferable even though you can’t turn them into cash they are still taxable.
Questions This Raises
So these are the questions I plan to ask my accountant when filing my taxes:
- Should I claim non transferable currencies I received a 1099-MISC for like airline miles?
- Should I go with the 1 cent per point valuation on a currency like Membership Rewards or should I claim their cash value of $0.50 a piece? Ultimate Rewards have a 1 cent cash value so those would be reported as such.
- If there was an annual fee on the card that I received the 1099-MISC on can I write it off since I am being taxed on some of the points earning?
I hope this gives you some ideas of what to discuss with your tax professional when filing your 2018 taxes. Remember that this is not tax advice but rather me sharing my thoughts and the questions I plan on asking my accountant.
I still believe that these were sent out for referrals and not welcome bonuses or points earning from spend because they did not result from spend on the credit card. I believe that, for the time being at least, welcome offers and points earned via spending are considered rebates and are overlooked. Hopefully it stays that way ;)!