Amex Sending Out 1099’s on Referral Bonuses

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I definitely did not see this one coming. Yesterday in the mail I received three unexpected 1099 forms from American Express—two for me and one for my husband. We both have a plethora of American Express cards and have used the refer a friend option to refer others to particular American Express credit cards when there are lucrative sign up bonuses. Typically, there is a bonus for the referrer—either in statement credits or in points which depends on the particular card. I’ve referred friends in the past many years and have never received such a document in the mail. It looks like this is the first time American Express is sending these out.

While I do not mind paying taxes when I’ve earned a straight statement credit for referring someone, I do have a problem paying taxes when I’ve received points. Especially because American Express values the points received at a significantly higher value than what they are worth:

  • Hilton — .67 cents per point
  • Starwood (now Marriott) — 1 cent per point
  • Delta — 1 cent per point
  • Membership Reward points — 1 cent per point

I looked back at mine and my husbands accounts and see that we have four accounts in total where we have referred others. Between the two of us, three of them are on Membership Reward earning accounts and one is for a Starwood account. We received three 1099 forms all for $550. I assume that is for the three Membership Reward accounts since it was a total of 55,000 points earned per account, worth $550 if we were to “cash out”. While paying taxes on this is a little crazy, in my opinion, I am fine with it since I know the value is truly at least $550. There is no scenario where I’d get less value. So really my $550 earned is worth only $300-$350ish I guess, but still something is better than nothing!

The other account where we received a referral bonus was for the Starwood Luxury card. My husband referred a friend and received 20,000 bonus points, but it was on December 30th. Either they just haven’t sent us that 1099 form yet, or it wasn’t accounted for in 2018 and we’ll receive the tax implications next year. Or maybe for just a minimal amount we were spared. I am really not sure. Based on American Express’s valuation, I might receive a 1099 form worth $200. There is no blogger out there that would value Marriott points at 1 cent per point! They are closer to .7 cents so having to pay a premium on these points earned is absolutely ridiculous. Being 1099’d on $200 means Ill probably pay around $75-80, maybe? I do not know my exact tax percentage off my head. So let’s say the $200 points I received are worth $150 and I am paying $80, that means I am really only netting around $60. Of course I will still be making out in the deal, but I do not love the fact that I am essentially speculatively buying points in advance. I am also not sure when or where I’ll redeem them and what if hypothetically Marriott suddenly shuts down or takes my points away (not that it would happen, but you never know).

Are you on the hook for paying taxes

I am the furthest thing from a tax professional, so I definitely recommend getting advice from your personal accountant. View from the Wing wrote an article awhile back saying that you can actually dispute the valuation of your miles. I’ve never gone through this process personally, but there is a process.

Should you refer a friend in the future

For American Express earning cards—YES! Of course it will not be as much as you thought, but it is still something worth more than the value and you can have the cash right in your pocket if you want. For Marriott, Delta, and Hilton I am not 100% sure. It depends on whether or not you want to lay out the cash now, the value at how you typically redeem your points, and whether or not you want to deal with more forms. I still will continue to refer friends as I know the points is still higher than the tax implications, but just be aware that you might receive the dreaded 1099 form one day!

Did you receive a 1099-MISC form? How are you handling it? Will you refer friends in the future still?

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Comments

  1. Last year I received a 1099 from Citibank and it did not match any of my accounts or describe what it was for. It took a while to track it down, but I had redeemed Citibank Thank You points in 2017 for a hotel stay and then had to pay income taxes on it. This was definitely a surprise and doesn’t exactly seem like an item subject to income — especially when we know that ‘the 1%’ get away with paying very little in taxes.

    • @Andreav R – this doesn’t sound correct – no taxes on using points.

      If what you are saying is correct you should not have received a 1099.

  2. Getting a 1099 form from American Express or Citibank would finish any business relationship that I had with either company. They could come back with all kinds of justification why they “must do this” but it’s at their discretion.

    Multi-billion companies like these behemoths that build offshore customer service centers to save paying American works a fair wage, while getting tax breaks and avoid paying corporate taxes.

    They can put their referral programs up their a*sses.

  3. 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.

    • Agreed. Might not be able to pin this on the new tax laws (which will prove to help only the elite) because it was a 2017 Form 1099 before the enactment of the new law. I wasn’t able to get Citibank to submit a corrected 1099 to the IRS and did not want to get audited by not reporting the fictitious ‘income’. I reported the $600+ and the tax hit was likely less than the hotel cost would have been at a lovely hotel in Barcelona. It was more than irritating though — and took a series of phone calls to even track it down to my ‘Thank You Points’. Hope this doesn’t happen when using AMEX or Chase points in the future.

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