It seems our sign up bonus money is "income" to the IRS

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MemberSince99
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It seems our sign up bonus money is "income" to the IRS

Postby MemberSince99 » Fri Jun 14, 2013 5:51 am

And you know what that means - it's taxable.

Now only bonuses that are over 600 get a 1099 sent out to the good old IRS, who just can't take enough of our money to give to Egypt and Pakistan these days while telling us how broke we are, but ANYTHING is considered income to the IRS.

If you really think about it, say you got a 650 sign up bonus (weird number but just for the sake of picking something that will be reported) and since they didn't take any taxes out of that, when the IRS gets around to raping you, with SS and medicare and all the other nonsense they take, it will probably hike your taxes close to 300 dollars depending on your income bracket, or possibly more.

So be careful about going for those sign up bonuses or you may find the IRS giving you a "bone us" next year.


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Postby Gamma » Fri Jun 14, 2013 7:15 am

Is this true? Where did you find this information? Also, will it be cumulative from the same lender? I always thought that even the sign up bonus is considered rebate since you're working on a spending requirement to get that bonus.

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Postby MemberSince99 » Fri Jun 14, 2013 7:51 am

Creditcards.com had an article that said this was the case and yes they are cumulative but they only send you a 1099 (meaning the IRS knows about it) only for greater than 600 dollars a year.

The IRS can consider it whatever they feel like considering it. They say it's free money to you which it is, rather than a rebate, therefore it is income.

Most of us never even knew that, I had no idea. And as much money as they take from me, it's not like I want to throw even more at them to waste on things I don't agree with. Pretty soon they'll take our whole damn check and decide what to give us back from it the way things are going, and even the polluted air you breathe will get a "usage fee".

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Postby djrez4 » Fri Jun 14, 2013 11:17 am

Bonuses and annual cash back.

If you get a BCP with a $250 bonus and max the grocery cap of $6,000 at 6% - $360 - you'll hit $610 dollars. Amex may send you a 1099. Citi is notorious for it.
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Postby MemberSince99 » Fri Jun 14, 2013 4:56 pm

But the cap money back is a rebate and not a sign up bonus they are supposedly considered different things.

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Postby Gamma » Fri Jun 14, 2013 9:54 pm

I wouldn't be surprised if people start getting 1099 from Citi after losing thousands of dollars from the unlimited 5% promotion.

Do you know if this already went into effect or do they start next tax year? That sucks cause I will be reported by Chase.

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Postby MemberSince99 » Fri Jun 14, 2013 10:12 pm

I believe it's been the law for some time, and how the IRS interprets it for some time. The article from creditcards.com was from last December. I guess if you know about it you can better prepare.

You know an even bigger kick to the gut is when some bill collector gets say 50% out of you, and agrees to not pursue the rest, or "forgives" the remaining 50% of the debt. You will get a 1099 for that 50% that was forgiven since the IRS considers that "income". That happened to me, was I shocked when I got WAY less of a return than I was expecting. And the real kicker is, even though you paid 50% and the rest was "forgiven", you could still find the original creditor selling the "debt" to some other vulture agency who then starts harassing you on a debt that's legally no longer a debt (since you paid half and were legally forgiven half). Good luck convincing them to leave you alone....sometimes I wonder how many people pay the same debt 2, 3 or more times.....and past the SOL at that.

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Postby cashback » Sat Jun 15, 2013 12:18 am

Gamma wrote:I wouldn't be surprised if people start getting 1099 from Citi after losing thousands of dollars from the unlimited 5% promotion.

Do you know if this already went into effect or do they start next tax year? That sucks cause I will be reported by Chase.


Ive been planning on getting one from them. I hope they dont though. 20k in tax free income would be nice
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Amex BCE 25K ---- PenFed Platinum Rewards 15.5K --- US Bank Cash+ 12K --- Discover IT 6K --- Citi Dividend 5K --- Chase Freedom 12.5K --- Amex SPG 6K --- Citi Thank You Preferred 15K

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Postby Gamma » Sat Jun 15, 2013 7:24 am

cashback wrote:Ive been planning on getting one from them. I hope they dont though. 20k in tax free income would be nice

Lets just hope they don't overvalue the points like they did few years ago I believe. They valued it at 2.5 cents/point, which is outrageous.

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Postby RewardHop » Sun Jun 16, 2013 12:32 am

Slightly off topic... if you sign up for a checking or savings account and get a sign up bonus, thats taxed under 1099 INT (interest). Even if its just $100 or $200. Just thought I'd throw that out there.
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Barclaycard Rewards Visa Signature: 2% gas, groceries, utilities
Capital One Quicksilver Visa Signature: 1.5% everything
Chase Freedom Visa Signature: 5% rotating
Citi Forward Visa: 5% restaurants/fastfood, movie theaters, amazon.com
Discover It: 5% rotating
SallieMae MC: 5% Groceries, Gas, Amazon
US Bank Cash+ Visa Signature: 5% electronic stores, restaurants
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