Amex issues 1099's for Gift Chain promotion

Discussion in 'General Discussion | Miles/Points' started by kyunbit, Feb 8, 2012.  |  Print Topic

  1. kyunbit
    Original Member

    kyunbit Silver Member

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    The latest report of a 1099 comes from an organization I never expected and a promotion I would not have dreamt in my wildest dreams

    Amex is issuing 1099s for the prizes from the Gift Chain promotion! (http://thepointsguy.com/2012/02/more-bad-news-on-taxes-and-points-amex-1099s-gift-chain-prizes)

    I would now be really wary of even getting a goodwill statement credit from Amex!

    Can some tax expert explain, under what clause are gifts for making purchases being considered taxable. I thought they should be classified as rebates.
     
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  2. autolycus

    autolycus Gold Member

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    Not a tax expert, but here's the logic I assume is being used: since the amount and nature of the "gift" is variable, it is a prize rather than a rebate. Prizes are subject to income tax, while rebates are not. I wonder if the terms of the promo allow for you to enter the promo without making an actual purchase, as most sweepstakes have to do in order to avoid running afoul of state gambling prohibitions.
     
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  3. kyunbit
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    kyunbit Silver Member

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    It did not. One had to make a purchase of $25 minimum to get the prizes, as far as I remember
     
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  4. mommypoints

    mommypoints Gold Member

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    No, I am 99.999% sure that you could mail in to get entries. I didn't do it, but I remember reading about others who did.
     
  5. tondoleo
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    tondoleo Gold Member

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    From the t&c of the promotion in the 2nd paragraph after the heading Rollover Gifts.

    All federal, state, and local taxes, if any, as well as any other costs and expenses associated with Gift acceptance and use not specified herein as being provided are the Recipient’s responsibility.

    These amounts on the 1099s are considered gifts. Thus, subject to tax.
     
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  6. icurhere2
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    icurhere2 Gold Member

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    We also have to remember that the individual receiving the 1099-MISC had enrolled seven cards, receiving prizes "worth" more than $1,100. The IRS requires a 1099-MISC for more than $600 in prizes. In other words, this individual would have not generated the form if "only" three cards were enrolled.
     
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  7. autolycus

    autolycus Gold Member

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    The receipt of gifts isn't taxable in the U.S. and no 1099 should be issued for a true gift. They're most likely being considered prizes, which are income, not gifts, even if the promotion was called "Gift Chain".
    Just to wrap it all up in a nice bow, here is what is at the bottom of the Gift Chain home page:
    So... I stand by my initial theory: the "gifts" are not gifts or rebates but are, in fact, sweepstake prizes, which are taxable income. What this means is that everyone who got something from this promo should theoretically pay taxes on it. Realistically, if you got less than $600 worth of stuff, Amex will probably not issue a 1099, and the IRS will never know that you had the extra income.

    This is clearly the new thing to pay attention to with some of these miles/points promos. It really can kill a lot of the value associated with them, and that's a shame.
     
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  8. tondoleo
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    tondoleo Gold Member

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  9. autolycus

    autolycus Gold Member

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    The receiver of a gift never has a tax liability. A 1099 is issued to someone who has income subject to income taxation. A gift is not income. A gift is something given without consideration in return. A prize from a sweepstake isn't a gift. It's given in exchange for some type of consideration, typically the time and/or money required to enter and eyeballs looking at promotional materials. Amex isn't giving anybody a gift, even if they call it the "gift chain". On that point, I am certain, and yes, I have enough specialized knowledge about income taxation to be confident in it.

    Your link discusses a tax levied on the giver of a gift. The discussion of an agreement for the recipient to pay the gift tax on behalf of the giver is definitely not what is happening here. The 1099 reflects that Amex has given someone "other income". If it was a gift with the recipient paying the tax for the giver, the tax wouldn't be on income reported on a 1099. It'd be tax reported by Amex as a gift tax that Amex was liable for, no matter who was paying it.

    Also note that gifts of up to $13k per year are excluded from the gift tax. If the "gift chain" was a gift from Amex to a customer or other, they wouldn't be reporting it for anything less than that amount because there would be no tax liability, for a gift or for income, for Amex or for the customer.
     
  10. mikeef
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    mikeef Silver Member

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    I'll add 0.001% to that to round it up to 100%. ;)

    You could definitely mail in entries, up to ten per person. For some reason, I just never got around to it.

    Mike
     
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  11. allegro761

    allegro761 Silver Member

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    Yes, mail in entries were allowed instead of entering by making purchases. I mailed in 3 entries and "won" twice. One was a $5 Amex credit and the other a $20 Amex gift card. Since these are less than $600, a 1099 is not required.
     

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