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1099-MISC Issued for Bank & Credit Card Bonuses

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 [3], 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).