Chase Sends Out 1099s For Referral Bonuses
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 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.
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?
Hat Tip: DoC