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Bank Issuing 1099 Tax Forms for Credit Card Bonuses

Last updated on February 22nd, 2021

According to some cardholders, Bank of America is sending tax documents for credit card signup bonuses. The 1099-MISC tax forms mean that the signup bonuses are taxable income – but are they, really?

Bank of America Issuing 1099-MISC for Air France Credit Card

Personal finance site, Doctor of Credit, reports that some Bank of America credit cardholders are receiving 1099-MISC tax forms for credit card sign up bonuses they earned. The documents specifically refer to the signup bonus with the Air France KLM World Elite Mastercard®. Currently the welcome offer is 50,000 Flying Blue miles.

Are Credit Card Rewards Taxable?

Typically, credit card signup bonuses are not classed as income. Because the bonus is usually dependent upon meeting a minimum spending threshold, these rewards are often considered to be a rebate. The same thought process also relates to cash back, rewards points, and frequent flyer miles.

IRS Guidance on Credit Card Points and Miles

The Internal Revenue Service’s (IRS) view is that points and credit card rewards are not taxable due to their differing and uncertain valuations. This stance was explained in a 2002 guidance release by the agency:

Consistent with prior practice, the IRS will not assert that any taxpayer has understated his federal tax liability by reason of the receipt or personal use of frequent flyer miles or other in-kind promotional benefits attributable to the taxpayer’s business or official travel. Any future guidance on the taxability of these benefits will be applied prospectively. This relief does not apply to travel or other promotional benefits that are converted to cash, to compensation that is paid in the form of travel or other promotional benefits, or in other circumstances where these benefits are used for tax avoidance purposes.

Other Banks and Services Issuing 1099 Tax Documents

Bank of America is not the only card issuer to confuse cardholders with tax forms. Citi sent out 1099 forms to AAdvantage credit cardholders for several years, resulting in a class-action lawsuit and settlement. Additionally, PayPal routinely sends out 1099-K documents to PayPal users who receive payments that are classified as “goods and services” or “third party network.”

Follow BestCards to Stay Up to Date on Tax Season Issues

As the deadline to file taxes approaches, stay informed about issues concerning taxation, credit cards, and personal finance. BestCards will continue to provide relevant and in-depth content to help you navigate the murky waters of tax season.

Related Article: Fed: Millions Paying Rent with Credit Cards

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About: Cory
Cory Santos

Cory is BestCards.com's "Jack of all trades" and resident credit expert, covering all facets of the credit card space. In addition to credit cards, Cory finds that jogging, cats, and memes are essential parts of a balanced day.