1099-MISC Issued for Bank & Credit Card Bonuses

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If you recently received a 1099-MISC from a credit card company or a bank and wondering if it’s a legitimate form, try to remember if you opened up any new accounts for the cash or reward point bonuses in the last year. In the tiny print at the bottom, the financial institution likely stated that a 1099-MISC would be issued in the event you satisfied all the promotion conditions. The 1099-MISC is a legitimate 1099 form and is used for Miscellaneous Income, banks consider these promotional payments to be miscellaneous income.

On the flip side, they don’t consider reward points earned through purchases as income. It’s like getting a rebate, you’re ultimately getting a discount on your purchase, not a commission payment for doing something (like signing up for an account). So, it’s generally accepted that you do not pay taxes on credit card rewards, but the IRS has yet to formally weigh in on the subject.

Here’s the kicker – some financial institutions are issuing 1099-MISCs for promotions involving reward points. So those promotions where you got 50,000 miles for signing up for a credit card? They’re valuing those miles in terms of dollars (well, in terms of cents) and issuing a 1099-MISC for it. What stinks about that scenario is that you didn’t get actual cash to start with and you’ve effectively “purchased” those miles at whatever rate they determine. It’s very sneaky (or very clever, depending on how you look at it).

{ 13 comments, please add your thoughts now! }

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13 Responses to “1099-MISC Issued for Bank & Credit Card Bonuses”

  1. Squeezer says:

    I thought some of the banks may issue a 1099-INT and not a -MISC for sign up bonses. That has been my experience which checking account sign up bonuses. However I’ve quit doing that in the past year or so because the days of free checking with no minumum balance requirements are gone.

  2. yourPFpro says:

    I am in the constant credit card churn, made some pretty good money in the past year… over $1500 from signing up for an AMEX gold card, and $500 from a Southwest Chase. I don’t really see how they can tax you on points though as these points can be redeemed at many varying redemption rates: gift cards, physical items, even cash..

    • Sun says:

      I spend $3,000 to receive 50,000 points. That’s a rebate not income. Sign up bonus does not require you to spend. Only to park your money most times. If it involves spending or bill pay, that is a grey area.

  3. Sun says:

    When I receive my 40k thank you points from citi for my citi gold checking, I will write the IRS, federal trade commission, and consumer protection bureau to audit their books.

    How are they able to write as a business expense of $625 per 25,000 thank you point sign up bonus, when the consumer can only redeem 25,000 points for $175 cash. that’s bs.

    It’s like your employer writing off $625 as an expense but only give you $175 pay.

  4. David M says:

    Does anyone know of banks that are issuing 1099 Misc for credit cards? I would love to know as I have never heard of this happening.

    Now, I knew banks did this when you got something for opening a savings account – this has been happening forever.

    Thanks in advance,

    David M

  5. Scott says:

    Many banks are now doing this for things like iPads and other product promos they give you for signing up. They will report the value of the product as interest to the IRS. As always, it’s all in the fine print.

    • cubiclegeoff says:

      Actually banks have been doing this for at least the last several years (as far as I’ve followed such things), so this is nothing new. On credit card bonuses, however, it is new.

      • David M says:

        I agree it has been “at least the last several years”. I think they have been doing it for more than 20 years.

        What banks are doing it on credit card bonuses? Does anyone know?

        • Sun says:

          I’ve not seen banks do this on credit card bonuses. I consider it a rebate. Spend $3,000 to get a rebate of $500 back. Same thing when you buy a widget and send off for a rebate check.

          • David M says:

            Thanks for replying Sun – much appreciated!

            Maybe Jim knows of some banks that are doing this.

  6. Crazy. if that is the case, the Sharebuilder bonuses are suddenly not as good of a deal anymore!

  7. Bunker Guide says:

    In 2011, Bank of America credited $75 to my checking account which is a California online account. However they did not issue 1099-MISC or any such form. They said since the gift/reward was below $600, 1099-MISC or any such form is not issued to customer.
    Should I voluntarily add $75 to my federal and state income when I file tax returns now? Or can I leave the $75 as it is?

  8. Shirley says:

    The $10 (or whatever amount) that you get from ING Direct for a validated recommendation for their savings account is considered as interest and you are taxed on it as such.

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