Chase Sends Out 1099s For Referral Bonuses
Chase has begun sending out 1099s for referrals for 2019. They are pricing the points at one cent a piece. If you had some referrals I would hold off on submitting taxes until you have everything from Chase and American Express.
Late last week people started getting a present in the mail from American Express. It was the gift of a higher tax tab come April because they sent out 1099s to anyone who had received a referral bonus. My tally is $1200 so far :(. It looks like Chase is sending their own out as well. Chase has valued all points at 1 cent a piece for the 1099s.
Why Now?
Why have banks started sending these out now? And why are they not sending them out for welcome offers or spending offers?
I think that this is likely coming from the IRS. With two different banks following the same guidelines I think it was relayed to them to do so.
I wonder if these are differentiated from welcome and spending offers because they are not a rebate on spending. The IRS has categorized credit card points and cash back as such in the past and has overlooked it for these reasons. Since referral bonuses are not a rebate on spend I think that is why they may be treated differently. Referrals fall more in line with bank bonuses.
Conclusion
While this is a trend I am not a fan of the referral greatly outweighs the cost of the tax implications. You could look at it as buying points at an extremely reduced cost.
What do you think this means going forward? And will this stop you from sending out referrals going forward?
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These are 2019 tax forms. 2020 tax forms will arrive in 2021.
You are correct I was thinking for filing taxes in 2020 haha – fixed thanks
I’m going to wait until I know I received the tax forms for all my referrals. Chase made it a PITA for me last year as they sent one form to my current address in August (extremely late) then another form to my previous address a few weeks later. They don’t know why the second form was second to my previous address, especially since all my Chase accounts list my current address. So, I had to refile my taxes two times because of their error.
That is annoying J
They have to issue 1099s if they pay $600 or more.
https://www.doctorofcredit.com/banks-send-1099s-referral-bonuses/
Business have to issue 1099s to businesses and independent contractors that they pay $600 or more, also. This is the case if you have your own schedule c, too.
How can something that doesn’t belong to you (points) be taxed?
That is a good question for your accountant. Mine told me to pay it last year so I did.
I’m just going to paste the comment I’ve made on other posts when folks starting getting the Amex 1099s… This is all thanks to the Republican/Trump tax code rewrite. Most little guys are finding they got screwed in the deal, and these 1099s are another example. But hey, the rich took home boatloads more cash.
I believe some thing to do with the new income tax law. These companies milk out all the advantages of new tax law. They get the much lower tax rate now I bet they want more favor deductible. Again it is just my guess.
As good of a guess as any
Fast forward, I received a 1099 MISC from Chase for a referral 40K bonus while holding a Bonvoy Boundless card. Problem is that the referral points posted to my Chase CC statement AFTER I closed the card a month earlier. While the statement shows 40K it also clearly states that ZERO points transferred to my Bonvoy Hotel account! Am I required to include this in my 2021 Tax return. Keep in mind I would be reporting the $400 (1 cent per point) for something (benefit) that I did NOT receive. Chase refuses to provide me a corrected 1099 even AFTER reporting this to them for resolution. Any advice? Thanks
I would get with your accountant. I am sure there is a way they could notate that you didn’t receive them.
I think the good old days are coming to an end. I have been traveling with points for the last 10 years usually getting close to $40,000 a year in free travel.
I do about 20 cruises a year. All of the credit card companies and banks are tightening up. One by one they are all tightening up. Its still possible to get approved for cards, just much tougher. Im not going to stop trying.
It is getting tougher for sure. It will go in ebbs and flows though. Banks will have to loosen up at some point in my opinion when the economy takes a hit and finding qualified applicants gets harder. They are making record profits right now and that is why they can turn the flow down right now.