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Bad news for those of you who referred friends and family members to American Express last year. Amex is reporting the referral bonus it paid you as taxable income — even if you received points for your referral.

Many cardholders received Form 1099-MISC in the mail Thursday from “American Express National Bank” reporting Other Income amounts for these referrals. The points valuations depend on what type of points or miles you received as compensation:

TPG‘s own Nick Ewen got one of these dreaded 1099-MISC in the mail yesterday reporting $100 of “Other Income” for referring a friend to The Blue Business℠ Plus Credit Card from American Express — a solid credit card that offers 2x Membership Rewards points per dollar spent on the first $50,000 of purchases each year.

 

If you’re in the same situation, you might be wondering what to do now. Let’s tackle this in Q&A style.

What should I do with this 1099?

It’s probably most proper for you to report on Line 21 Other Income of your Form 1040 personal tax return. An exception to that would be if you make a legitimate business out of referring people to American Express credit cards — in which case you can file on Schedule C along with any related expenses.

What if I already filed my tax return?

Unfortunately, you’re going to need to file a superseding tax return to report this income — unless you want a letter from the IRS asking you why you didn’t include this income. And the problem with those letters is that they usually come with penalties and interest.

What if I don’t agree with the valuation of the points?

It’s probably not worth fighting the valuation for this small amount of income. However, there’s a prolonged tax law explanation on why these points probably aren’t actually taxable yet. If you want to go down that path, you’ll want to talk with a tax professional about how to do so without prompting a notice from the IRS.

Can I just ignore the 1099?

You could, but I wouldn’t recommend it. As this form was — or will be — filed with the IRS, the taxman is going to expect you to report this income on your personal tax return. Ignoring it will almost certainly net you a “matching notice” letter from the IRS noting the discrepancy.

Is there anything else I can do?

You could complain to American Express about getting a 1099, and Amex might just send a corrected 1099-MISC with a lesser amount of income. For the 2016 tax year, Chase sent out 1099s reporting income for referrals before sending out a “corrected” 1099 adjusting that income amount to $0. Reaching out to Amex may not change anything, but it could be worth a shot.

The author is a Certified Public Accountant (CPA) in Georgia. However, this article has been prepared for informational purposes only, and is not intended to provide — and should not be relied on as — tax advice. Please consult your tax professional.

Featured image by wutwhanfoto via Getty Images

The Business Platinum® Card from American Express

Aside from the 75,000 points welcome bonus, Amex recently made huge improvements to the Business Platinum Card, including the fact that you will now earn 50% more points on purchases of $5,000 or more, earn 5x on flights and eligible hotels at Amextravel.com and cardholders will receive a $200 airline fee credit each year.

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More Things to Know
  • Welcome Offer: Earn up to 75,000 Membership Rewards® points.
  • Earn 50,000 Membership Rewards® points after you spend $10,000 and an extra 25,000 points after you spend an additional $10,000 all on qualifying purchases within your first 3 months of Card Membership.
  • Get 5X Membership Rewards® points on flights and prepaid hotels on amextravel.com.
  • Get 50% more Membership Rewards® points. That's 1.5 points per dollar, on each eligible purchase of $5,000 or more. You can get up to 1 million additional points per year.
  • 35% Airline Bonus: Use Membership Rewards® Pay with Points for all or part of a flight with your selected qualifying airline, and you can get 35% of the points back, up to 500,000 bonus points per calendar year.
  • Enroll to get up to $200 in statement credits annually by getting up to $100 semi-annually for U.S. purchases with Dell. Terms apply.
  • Get one year of Platinum Global Access from WeWork. With this membership, you can access 300+ premium, inspiring workspaces in 75+ cities. To get this exclusive offer, enroll between 2/15/2019 and 12/31/2019.
  • Terms Apply
  • See Rates & Fees
Intro APR on Purchases
N/A
Regular APR
N/A
Annual Fee
$595
Balance Transfer Fee
See Terms
Recommended Credit
Excellent Credit
Terms and restrictions apply. See rates & fees.

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