Hello Taxes! Chase Is Sending Out 1099s for Referral Bonuses

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Hello Taxes!  Chase Is Sending Out 1099s for Referral Bonuses

Jason StaufferHello Taxes!  Chase Is Sending Out 1099s for Referral BonusesMillion Mile Secrets Team

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Last week we got the news that AMEX has been sending out 1099s for referral bonuses.  Right on the heels of that, people are reporting that Chase is doing the same.

It looks like Chase is valuing all points at 1 cent each and you’ll be getting a 1099 if you earned $600+ in points from referrals.  I earned a couple referral bonuses on my Chase Sapphire Preferred® Card last year, but I’m well under the $600 threshold.

If You Earned Bonus Points By Referring Friends Last Year, You Could Be Getting a 1099 From Chase

Chase 1099 Referral Bonuses

There are a lot of opinions out there on what do to about this.  Personally, I would pay the taxes.  Remember if you’re getting a 1099 for $600 that’s the extra income you need to report not the extra taxes you’ll pay.

Even though I’ve heard some experts mention that it might be possible to fight this, I can’t imagine that it would be worth the effort for most people.  If your tax rate is 25% you’ll only end up paying $150 for $600 in extra income.

I think a 1 cent value for Chase Ultimate Rewards points is fair, but if you earned a referral bonus for Marriott or IHG points that’s definitely an over valuation.  Again, I doubt it’s worth fighting it, but you’ll have to make that call for yourself.

I’m not a tax professional, so if you plan on doing anything other than just paying up be sure to consult one.  And please don’t just ignore this, 1099 forms are sent to you and the IRS.  So if you file your taxes and don’t report your 1099 income you could end up paying interest and penalties on top of the extra taxes.

Did you get a 1099 from Chase?  What did they value the points at?

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Chase Sapphire Preferred® Card

Chase Sapphire Preferred® Card

  • Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $750 toward travel when you redeem through Chase Ultimate Rewards®
  • Chase Sapphire Preferred named "Best Credit Card for Flexible Travel Redemption" - Kiplinger's Personal Finance, June 2018
  • 2X points on travel and dining at restaurants worldwide & 1 point per dollar spent on all other purchases.
  • No foreign transaction fees
  • 1:1 point transfer to leading airline and hotel loyalty programs
  • Get 25% more value when you redeem for airfare, hotels, car rentals and cruises through Chase Ultimate Rewards. For example, 60,000 points are worth $750 toward travel
  • No blackout dates or travel restrictions - as long as there's a seat on the flight, you can book it through Chase Ultimate Rewards

More Info

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However, if you use the points for business expenses. Schedule C. You would now show a business expense. If you redeemed points for business travel, you would now expense those points. Or for business lodging.

It would certainly be easier if the points weren’t income, but that genie seems to now be out of the bottle.

Hi Stanley!

It certainly does seem like the cat is out of the bag, but if you have a good accountant then I’m sure they can find ways to write off more business expenses, as you mention 🙂

It’s really not that bad. Before, if you used the points for business, you couldn’t write the expense off, since the points were free and you had no basis in them.

Now, the points are income, at the rate of 1 cent per point, so you can write off business expenses at the rate of 1 cent per point.

Just track the income points separately, and be sure to use them for a legitimate business expense.