Apparently American Express is sending out 1099s to people who referred customers to their credit cards.
American Express is probably right to do this. The points are compensation for helping them acquire a customer, rather than a rebate on your card activity.
And of course whether you receive a 1099 doesn’t speak to whether you owe tax. It’s informational reporting from American Express to the IRS. If they pay taxable income but don’t report it, the income is still taxable. Here they’ve now determined, it seems, that the points are taxable and therefore reportable.
Here’s how Amex appears to be valuing the points they awarded to you:
Thanks to all who are sending me datapoints. So far,
Amex Membership Rewards: 1 cent per point
Marriott (new): 1 cent per point
Hilton: 1.25 cents per point
How in the WORLD are they valuing Hilton above Marriott and MRs?????
— Dave @ MilesTalk ✈️ (@MilesTalk) January 31, 2019
These Marriott and Hilton points are way overvalued. In fact I’ve spoken with American Express executives who in conversation with me have valued Marriott points at 75 basis points. Hilton regularly sells points for half of what American Express is reporting — highly suggestive that the market value is lower (since it’s a price at which willing buyers and sellers transact).
Just because Aemrican Express tells the IRS that Hilton points are worth 1.25 cents apiece doesn’t mean that’s the revenue on which you owe tax. You can dispute the value and pay less tax as a result. Here’s the process to do it.
Bizarrely consumers successfully settled a class action suit against Citi for failing to adequately disclose that they were going to send out 1099 forms reporting bonuses to the IRS. Given how surprising this is I wonder if an enterprising attorney will try to repeat the trick. However there’s fine print on the referral site saying they’ll do this, which is probably adequate disclosure.
Update: American Express is valuing Hilton points at $0.0067 cents apiece — still too high, but not insane.