Surprising Bank 1099
It feels like 2024 is the year of 1099s. This is nothing new, banks have been sending these out for certain things for years now. Even if the 1099s did take some people by surprise this year, and caused a bit of overreaction, they were a known commodity. At least we thought we knew what to expect with them, but three different instances did catch me by surprise this year. Nothing more than the cheapness that is getting a surprising bank 1099 for thankyou gift though.
**I should note that I am not a tax professional and this is not tax advice.
The Expected Reasons To Receive A 1099
As I talked about last week, the two most prevalent reasons to receive a 1099 from a bank is for bank account bonuses or from refer a friend bonuses on your credit cards. Standard interest income earning on savings accounts etc. is another popular reason but this is discuss more from the miles and points side of things.
The bank bonus is pretty straight forward, it is considered interest income and that is explained in the terms when signing up. The refer a friend bonus 1099s were the thing some people did not expect. That is because 1099s are not sent out for welcome offers or the points you earn from spending on your credit cards over time. That is because both of those things are considered a rebate on spend which has not been considered taxable by the government. The referral bonuses are a bit different since they do not require spend. That is what we saw the majority of people receive their 1099s for too.
Three Other Reasons People Received A Surprising Bank 1099
While the vast majority of people got a 1099 in their mailbox were because of bank bonuses, referral bonuses or interest income, there were three other instances that were kind of bizarre. At least I can't remember seeing these in the past. The banks seem to be over the ToP at covering their butts this time around.
Some Received A 1099 For A Welcome Offer
We received multiple reports in the ToP Facebook Group of people receiving 1099s for their Marriott Bonvoy 5 x 50K certificates welcome offer. This would be something new, and doesn't follow the pattern. It is likely some sort of an error because it wasn't a standard points style welcome offer. I would get with the issuing bank and see if they can correct the 1099. If not then I would handle it with your tax professional. I guess this is just another reason why those free night cert offers are not all they are cracked up to be.
There were also some reports of retention offers receiving a 1099 from the bank. It seems to depend on how the retention offer was structured. It looks like if it was a straight statement credit, without any spend required, then some banks issued 1099s for them. This seems like a new reason to receive a 1099 to me. I don't remember hearing about these in the past.
Cardmember Thankyou Gift
This is the one that is really wild to me, and overly cheap. Remember those gifts the banks (Gift 1 & Gift 2) are sending out for cardmember appreciation? Well, many people received a 1099 for some of those gifts. Let me get this straight, you send people a gift to thank them, a gift they didn't ask for, and then hit them with a tax bill for it? As I said above, I am no tax professional but I believe the banks could have just paid the taxes for it themselves. That would have been the prudent thing to do instead surprise your “most loyal” customers with a 1099. It just sours the entire gesture in my opinion.
Surprising Bank 1099: ToP Thoughts
Even though I was suspecting everything I received in the mail, there were some surprising bank 1099 reports this year. Ones that went beyond the scope of previous years. I am not sure if this because of more government scrutiny or if the banks just had more time on their hands.
If you received one of the 1099s for the Marriott welcome offers then you will want to work on that one with your tax professional. I am not sure there is much you can do about the retention offer and thankyou gift ones though. It is something else to discuss with your tax specialist to make sure you have thought of everything and have all of your bases covered.