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I was told by a BofA CSR that if I redeem my credit card rewards as a statement credit to the card, it is not reported as it is considered a rebate by BofA.

However if I redeem to my BofA checking account to gain the preferred rewards bonus (10%-75% depending on my relationship status, i.e. platinum honors)  the entire amount redeemed to my checking account is reported on 1099-INT if total amounts redeemed exceeds $599 in the calendar year and therefore becomes taxable.  

Can anyone verify if this is accurate?  THX

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Assuming CSR is correct, its actually $599 max per account per year, at $600 or more, 1099-misc is issued

mmtraxx (Oct. 11, 2016 @ 1:22p) |

Disclaimers: I am not a finance or tax expert. My comments below apply not only to CC rewards, but various sign-up bonus... (more)

adamc (Oct. 12, 2016 @ 8:58a) |

And yet, all the jobs are still in Boston  (fwiw , i wouldn't live in either)

2.7 million jobs in boston metro. 750k in e... (more)

rufflesinc (Oct. 12, 2016 @ 9:01a) |

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It may be correct information. The T&C from my new to me BAC MLB Cash Rewards card says a 1099 may be issued regardless of how paid or credited. What you were told is legally correct as I read the available information. Personally, I choose not to fight the system if a 1099 were issued when by that information, it should not have been. BAC is not the only one to add 1099 language to the T&C of many banks and credit cards this year.

Just because you did not receive 1099 that does not mean you dont have to pay taxes.

fleetwoodmac said:   Just because you did not receive 1099 that does not mean you dont have to pay taxes.
That is true, but in this case credit Card Cash back is not considered income by IRS. I wonder what the justification is for issuance of 1099.

From the IRS Ruling: "A rebate received by a buyer from the party to whom the buyer directly or indirectly paid the purchase price for an item is an adjustment in purchase price, not an accession to wealth, and is not includible in the buyer’s gross income."

That's crazy!

t0s9476 said:   
fleetwoodmac said:   Just because you did not receive 1099 that does not mean you dont have to pay taxes.
That is true, but in this case credit Card Cash back is not considered income by IRS. 

  Wonder how long that will last. With recent ramping up of charging sales tax for online purchases where everything used to be tax free, this can't be far behind among tax loopholes to be closed.

atikovi said:   
t0s9476 said:   
fleetwoodmac said:   Just because you did not receive 1099 that does not mean you dont have to pay taxes.
That is true, but in this case credit Card Cash back is not considered income by IRS. 

  Wonder how long that will last. With recent ramping up of charging sales tax for online purchases where everything used to be tax free, this can't be far behind among tax loopholes to be closed.

  It's not a loophole.  Unless you would also argue coupons used at the grocery store must be claimed as taxable income...
The only place credit card rewards have always been pretty grey area is if you get a refund larger than the purchases, then that should likely be income.  But  I don't know that there's many existing credit card offers that give $$$ with no minimum purchase (There used to be lots!).

Bank account related bonuses are income because there's no purchase, it's just your own cash sitting there, so they usually just treat it as 100% "interest".
 

Bend3r said:   
atikovi said:   
t0s9476 said:   
fleetwoodmac said:   Just because you did not receive 1099 that does not mean you dont have to pay taxes.
That is true, but in this case credit Card Cash back is not considered income by IRS. 

  Wonder how long that will last. With recent ramping up of charging sales tax for online purchases where everything used to be tax free, this can't be far behind among tax loopholes to be closed.

  It's not a loophole.  Unless you would also argue coupons used at the grocery store must be claimed as taxable income...

 

  does it make a difference if you use your personal rewards card to pay for company travel expenses and are then fully reimbursed by your company?

t0s9476 said:   fleetwoodmac said:   Just because you did not receive 1099 that does not mean you dont have to pay taxes.
That is true, but in this case credit Card Cash back is not considered income by IRS. I wonder what the justification is for issuance of 1099.

From the IRS Ruling: "A rebate received by a buyer from the party to whom the buyer directly or indirectly paid the purchase price for an item is an adjustment in purchase price, not an accession to wealth, and is not includible in the buyer’s gross income."


True. Unless something has changed, they're rebates. Not taxable. I've heard rumblings about things may change in the future, but I hope not. Being taxed on stuff like points and earning miles with cards, would make these cards less worthwhile, especially since these points/miles may not be redeemed for a long time, and possibly never.

Bend3r said:   
atikovi said:   
t0s9476 said:   
fleetwoodmac said:   Just because you did not receive 1099 that does not mean you dont have to pay taxes.
That is true, but in this case credit Card Cash back is not considered income by IRS. 

  Wonder how long that will last. With recent ramping up of charging sales tax for online purchases where everything used to be tax free, this can't be far behind among tax loopholes to be closed.

  It's not a loophole.  Unless you would also argue coupons used at the grocery store must be claimed as taxable income...
The only place credit card rewards have always been pretty grey area is if you get a refund larger than the purchases, then that should likely be income.  But  I don't know that there's many existing credit card offers that give $$$ with no minimum purchase (There used to be lots!).

Bank account related bonuses are income because there's no purchase, it's just your own cash sitting there, so they usually just treat it as 100% "interest".

  Well sure it is. Hope it's here for a long time, but nevertheless still pretty much a loophole. You get money in exchange for providing a service to the credit card company. Usually is taxed in most other cases. Not much different than getting income from work.

atikovi said:   
Well sure it is. Hope it's here for a long time, but nevertheless still pretty much a loophole. You get money in exchange for providing a service to the credit card company. Usually is taxed in most other cases. Not much different than getting income from work.

 
Providing a service to the credit card company? They're providing the service to the merchant and me, and the rewards are a rebate. Pretty cut and dried.

By using (the service), their card instead of another, they are "paying" you. It just a loophole that you don't pay income tax on it. Yet.

rufflesinc;19652378 said:

does it make a difference if you use your personal rewards card to pay for company travel expenses and are then fully reimbursed by your company?

The rewards themselves were a small percentage rebate of your travel costs and therefore are not taxable.

Technically you then received reimbursement from your company in excess of your net travel costs (after rewards). So I guess you could complete Form 2106 and report the excess reimbursements on Form 1040 line 7 as income. I have never heard of anyone doing this nor the IRS suggesting that this was required or even correct.

However, it is not dissimilar to the requirement for a business using reward cards to only deduct net expenses (after rewards).

There were various findings about this over the years but effectively the IRS considers Credit Card rewards to be a 'non-taxable' rebate. However, checking or savings rewards are considered 'taxable interest'. So as long as you are getting only Credit card rewards then they are non-taxable no matter how you redeem them. That said, I try to pull a refund check or other reward method because they typically have a higher value than statement credits.

The one caveat that I know about is when you get rewards from both credit card and a deposit account from the same bank. For instance, Citi offers 'Thank you' points for both their deposit accounts and credit card accounts. So if you receive thank you rewards from a deposit account and a credit card account then citi considers all of the rewards taxable and will send you a 1099 form.

t0s9476 said:   
fleetwoodmac said:   Just because you did not receive 1099 that does not mean you dont have to pay taxes.
That is true, but in this case credit Card Cash back is not considered income by IRS. I wonder what the justification is for issuance of 1099.

From the IRS Ruling: "A rebate received by a buyer from the party to whom the buyer directly or indirectly paid the purchase price for an item is an adjustment in purchase price, not an accession to wealth, and is not includible in the buyer’s gross income."

OP - are these points earned from purchases or from a sign-up bonus? If a bonus, then I can see how the standard exemption wouldn't apply, since it's not really a rebate for purchases made.

Great question, OP. Just my two cents deposited to the discussion... I would think that, to be nitpicky, the percentage back on purchases are technically a rebate, regardless of where the funds go... whether to the card balance or into an account. However, by the same nitpicking, the extra point one percent or whatever the amount they add as an incentivebfor depositing to an account, might be considered a bonus, and therefore income! Either way, it's a nice first-world problem to have! I wonder how those thousand dollar rebates when buying a new car, are processed?

BrianGa said:   
t0s9476 said:   
fleetwoodmac said:   Just because you did not receive 1099 that does not mean you dont have to pay taxes.
That is true, but in this case credit Card Cash back is not considered income by IRS. I wonder what the justification is for issuance of 1099.

From the IRS Ruling: "A rebate received by a buyer from the party to whom the buyer directly or indirectly paid the purchase price for an item is an adjustment in purchase price, not an accession to wealth, and is not includible in the buyer’s gross income."

OP - are these points earned from purchases or from a sign-up bonus? If a bonus, then I can see how the standard exemption wouldn't apply, since it's not really a rebate for purchases made.

  In the past, this would be common when $300 bonuses after first purchase (of $0.01 or more) would result in the "income".  
However, now there's almost always a minimum spend requirement that exceeds the sign-up bonus, which makes virtually all of the new sign-up bonuses ables to always be considered a rebate.

t0s9476 said:   
fleetwoodmac said:   Just because you did not receive 1099 that does not mean you dont have to pay taxes.
That is true, but in this case credit Card Cash back is not considered income by IRS. I wonder what the justification is for issuance of 1099.

From the IRS Ruling: "A rebate received by a buyer from the party to whom the buyer directly or indirectly paid the purchase price for an item is an adjustment in purchase price, not an accession to wealth, and is not includible in the buyer’s gross income."

  Assuming OP is relaying what the CSR said accurately, BoA appears to not consider the rewards a rebate if the amount is redeemed to checking and, thus, would not fall under an exclusion from taxable income.  As with you, I do not necessarily know why the 'original' rewards would lose its rebate status based on the method of redemption, but I can easily see that any 'bonus' earned from choosing a particular method of redemption may be construed as taxable income depending on how the payee so chooses to treat said payment of the bonus.  BoA seems to have concluded that the amount that would normally be considered a rebate under the statement credit redemption option is recharacterized as taxable income in conjunction with the bonus taxable income.   I cannot think of a reason why this would occur and I wonder if, perhaps, the CSR misspoke and meant to say only the bonus amount would be subject to 1099 reporting or if CSR did, in fact, say this and OP might have misunderstood.

I think where this might get complicated is when Bank of America gives a 10% bonus if you deposit it into a BoA checking/savings account. So part of your bonus was thus given based on you having a bank account.

I cashed in a ton under BOA this year, and if they send a 1099 I won't be paying anything other than interest I earned related to bank accounts. If the IRS wants to ask me any questions I'll send all the documentation they want along with a copy of the IRS ruling calling CC rewards rebates.

justignoredem said:   I think where this might get complicated is when Bank of America gives a 10% bonus if you deposit it into a BoA checking/savings account. So part of your bonus was thus given based on you having a bank account.

I cashed in a ton under BOA this year, and if they send a 1099 I won't be paying anything other than interest I earned related to bank accounts. If the IRS wants to ask me any questions I'll send all the documentation they want along with a copy of the IRS ruling calling CC rewards rebates.

  I agree with your logic, makes sense.  The info provided to me by the CSR (he seemed knowledgeable and also checked with his supervisor on this specific issue) is that BofA will report the entire amount (credit card rewards + bonus to checking account) if the cumulative amount is more than $599 in calendar year despite what the BofA BankAmeriDeals FAQ states:

"Generally speaking, points, cash back, rewards and discounts associated with debit and credit card transactions are considered nontaxable rebates that reduce the purchase price of the goods or services that gave rise to the reward. They are not income and, therefore, do not require 1099 reporting."

 Trying to determine if anyone was in a similar situation and whether or not they received a 1099 previously, the only way to verify if CSR gave me correct info. 

atikovi said:   With recent ramping up of charging sales tax for online purchases where everything used to be tax free

States have had use tax for decades. Just because no one used to bother reporting and paying doesn't mean that it was really "tax free."

Chyvan said:   
atikovi said:   With recent ramping up of charging sales tax for online purchases where everything used to be tax free

States have had use tax for decades. Just because no one used to bother reporting and paying doesn't mean that it was really "tax free."

  This is true and applies to most physical goods.
Many states exempted services purchased from outside of the state from use tax though, until the recently crafted laws to snare netflix (among other services).

Chyvan said:   Just because no one used to bother reporting and paying doesn't mean that it was really "tax free."
 

  I would argue, that's exactly what tax free means, if states never enforced it.

atikovi said:   
Chyvan said:   Just because no one used to bother reporting and paying doesn't mean that it was really "tax free."
  I would argue, that's exactly what tax free means, if states never enforced it.

  "It's not committing murder if they can't prove I did it!!!!  That means it was perfectly legal!"

And it was enforced, they just had no way to know the individuals were fraudulently reporting their income taxes, because they didn't have bulk sales/identity data from all other states to go with transactions.  There was just no way to prove it was occuring (aside from large or otherwise trackable transactions, like vehicles, which they did nail some people for not reporting).

Having people keep track of every online purchase for a whole year is overly burdensome. Paying sales tax in the state you live in for a purchase in another state, seems vaguely unconstitutional. It makes more sense that you would be required to pay the sales tax to the state from where the purchase was made.

atikovi said:   Having people keep track of every online purchase for a whole year is overly burdensome. Paying sales tax in the state you live in for a purchase in another state, seems vaguely unconstitutional.
 

  
You don't have to pay sales tax to your state of residence for an online/catalog/mail order purchase made in another state.  Instead you pay a use tax, which conveniently is the same rate.  (Assuming your state even has state sales/use taxes). 
 

NEDeals said:     Instead you pay a use tax, which conveniently is the same rate. 
 

  
You sound like a government politician.

Bend3r said:   
atikovi said:   
Chyvan said:   Just because no one used to bother reporting and paying doesn't mean that it was really "tax free."
  I would argue, that's exactly what tax free means, if states never enforced it.

  "It's not committing murder if they can't prove I did it!!!!  That means it was perfectly legal!"

And it was enforced, they just had no way to know the individuals were fraudulently reporting their income taxes, because they didn't have bulk sales/identity data from all other states to go with transactions.  There was just no way to prove it was occuring (aside from large or otherwise trackable transactions, like vehicles, which they did nail some people for not reporting).

  So what about all those MA residents shopping in NH?

rufflesinc said:   
Bend3r said:   "It's not committing murder if they can't prove I did it!!!!  That means it was perfectly legal!"

And it was enforced, they just had no way to know the individuals were fraudulently reporting their income taxes, because they didn't have bulk sales/identity data from all other states to go with transactions.  There was just no way to prove it was occuring (aside from large or otherwise trackable transactions, like vehicles, which they did nail some people for not reporting).

  So what about all those MA residents shopping in NH?

  NH and MA have "fought" many border wars.

There is no sales tax in NH, but there is in MA. Several years ago, MA Gov. Deval Patrick attempted to extort businesses with locations in MA and NH to provide information on NH sales to MA residents. The flash point was a tire retailer who went public with the attempts. Ultimately, NH passed a law making it a crime to divulge such privacy information. Then to add insult to injury the MA Supreme Court Ruled against Patrick.

In NH the state liquor stores are the only allowed liquor retailer and the prices are much lower than MA. Many years ago, MA was sending tax agents and undercover MA state police to NH border liquor stores. They would record any MA license plates and radio them ahead. Then the MA state police would lie in wait at the border and pull over those cars. Word got back to the NH Governor (cantankerous Mel Thomson), who ordered the state police to arrest them all and take them to jail.

NH also has no state income tax, but it used to have a non-resident commuter's tax to directly targeted MA residents working in NH. This was until the SCOTUS ruled it unconstitutional.

btuttle said:   
There is no sales tax in NH, 

  On used cars too? Or do they call it an "excise" tax? Have to be a NH resident to title a car??

mmtraxx said:   I was told by a BofA CSR that if I redeem my credit card rewards as a statement credit to the card, it is not reported as it is considered a rebate by BofA.

However if I redeem to my BofA checking account to gain the preferred rewards bonus (10%-75% depending on my relationship status, i.e. platinum honors)  the entire amount redeemed to my checking account is reported on 1099-INT if total amounts redeemed exceeds $599 in the calendar year and therefore becomes taxable.  

Can anyone verify if this is accurate?  THX

  
Bonuses to checking/savings accounts are considered income by the IRS.  Credit cards rewards are considered rebates, and are only taxable if you liquidate the item purchased for more than the cost-basis you have in the item (sale price - CC rewards).  Normally, only businesses worry about cash basis since most individuals are not using their credit cards to buy items to resell.

Likely BoA is just employing a CYA policy.  The IRS would most likely consider the % bonus given for redeeming to a checking account to be taxable income (it is a bonus only earned via the checking, redeeming the CC rewards other ways doesn't yield this bonus).  So BoA has to track all these redemptions as taxable income.  Given BoA has to track the transactions anyway, and to avoid any errors where CC to checking rewards get mixed in with checking account bonuses, the err on the side of reporting the entire amounts to the IRS.

Also, on the back-end, they likely did not create their database with the intention of tracking what portion of a checking account bonus came from CC rewards vs. % bonus.  They would either have to recreate their database to add in additional fields to track this info, or just query the database for the total amount of bonuses deposited into each checking account at year end to generate their 1099s.

fleetwoodmac said:   Just because you did not receive 1099 that does not mean you dont have to pay taxes.
  
By law, you are responsible and can be punish for everything if you know it or not.  So it is your responsibility to find out all and pay your offering to the god (IRS).

They will equally punish you if you intended or not to avoid paying tax.  So far the only one get away without any punishments using "unintended" is...... well, you know that woman in pants suit.  If I say her name the mod will say I am discussing politics, so I won't.  Law doesn't ask for your intention, you did it and you get punish for it.  The plea un-intentional will reduce it a little if any.

atikovi said:   
btuttle said:   
There is no sales tax in NH, 

  On used cars too? Or do they call it an "excise" tax? Have to be a NH resident to title a car??

No sales tax in NH on anything including automobiles. NH residents buying an automobile in MA pay no MA sales tax. MA residents buying a car in NH still have to pay 6.25% MA sales tax.

MA has a 2.5% excise tax (used to be 6.6% before early 80's). NH doesn't call it a excise tax, rather a permit fee, but if it looks like an excise tax... It is 1.8% of base MSRP, decreasing 0.3%/year.

You must be a NH resident with a street address. No PO boxes/suites (mail drops).
 

In the Midwest, sales tax/use tax on automobiles is collected when you register the vehicle to get the tags.

I made two phone calls into customer service today seeing if I could get clarification on this matter ( between the wife and I we have transferred 1200 into her checking account).  First rep said no, it is not reported as interest and checked with his supervisor.  Second rep said yes all reward amounts transferred into a checking account are considered interest after checking with his manager. So, they have no clue and is quite frustrating.

My thoughts:

1.  Why would anyone transfer into a BofA account if knowing they would be taxed on the amount?  It would negate the 10% bonus plus some.

2.  Only my wife has a BOFA checking account so both of our rewards were funneled into her checking for the 10% bonus.  How would she be liable for the full amount redeemed to her account when some of the reward from the credit card was earned under my name/my account?  Isn't it my reward and therefore shouldn't I be the one taxed?

3.  In my opinion, I would like to think only this bonus amount is taxable (the 10%).  So, if BofA sends out a 1099 for the full amount credit card rewards plus bonus is there any recourse for dispute?  Do you just use the taxable amount you feel is correct? I have never been in that situation before.


 

WorkerAnt said:   
Law doesn't ask for your intention, you did it and you get punish for it. 

  This is a huge misstatement of how the law works.

I am not going to worry about it.

If BofA issues a 1099,  include it in your tax return.

If they don't then forget it.

You should be fine unless you happened to make a political contribution to a Tea Party organization. In that case, expect to be called in by the Lois Lerner division of the IRS for a full financial colonoscopy.

 

btuttle said:   ​NH doesn't call it a excise tax, rather a permit fee, but if it looks like an excise tax... It is 1.8% of base MSRPYou must be a NH resident with a street address. No PO boxes/suites (mail drops).
  Well dang, that's no good, and Oregon and Alaska are a bit too far away.

So, if you stay under 599 in a year for opening bonuses and cc rewards, and bonus cc rewards, you're fine? I'm fine with actual checking interest, or hell even the bonus amount of the credit card award, but not the regular credit part being taxed.

Skipping 6 Messages...
btuttle said:   
rufflesinc said:   
Bend3r said:   "It's not committing murder if they can't prove I did it!!!!  That means it was perfectly legal!"

And it was enforced, they just had no way to know the individuals were fraudulently reporting their income taxes, because they didn't have bulk sales/identity data from all other states to go with transactions.  There was just no way to prove it was occuring (aside from large or otherwise trackable transactions, like vehicles, which they did nail some people for not reporting).

  So what about all those MA residents shopping in NH?

  NH and MA have "fought" many border wars.

There is no sales tax in NH, but there is in MA. Several years ago, MA Gov. Deval Patrick attempted to extort businesses with locations in MA and NH to provide information on NH sales to MA residents. The flash point was a tire retailer who went public with the attempts. Ultimately, NH passed a law making it a crime to divulge such privacy information. Then to add insult to injury the MA Supreme Court Ruled against Patrick.

In NH the state liquor stores are the only allowed liquor retailer and the prices are much lower than MA. Many years ago, MA was sending tax agents and undercover MA state police to NH border liquor stores. They would record any MA license plates and radio them ahead. Then the MA state police would lie in wait at the border and pull over those cars. Word got back to the NH Governor (cantankerous Mel Thomson), who ordered the state police to arrest them all and take them to jail.

NH also has no state income tax, but it used to have a non-resident commuter's tax to directly targeted MA residents working in NH. This was until the SCOTUS ruled it unconstitutional.

  And yet, all the jobs are still in Boston  (fwiw , i wouldn't live in either)

2.7 million jobs in boston metro. 750k in entire NH.

http://www.bls.gov/regions/new-england/news-release/areaemployme...
http://www.bls.gov/regions/new-england/new_hampshire.htm



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