Reading the fine print on the Marriott Rewards Facebook one million points sweepstakes I noticed that the winner of the grand prize (1,000,000 points) will be sent an IRS form 1099 in the amount of $12,500.00, (the actual retail value of those points).
Having won previous non-Marriott contests I can assure you that the 1099 also reaches the IRS, and is an audit trigger.
That being said, the prize would be nice to win regardless of the tax consequences.
Yes and no Jerry. The IRS would love to have all the FF and MR information at their fingertips so they could determine what tax liability they are missing out on when we use points, but
Here's hoping that if the taxman ever gets serious about these benefits we'll have enough warning to empty our accounts!
My understanding of the tax consequences in the US is as follows:
If you personally earned the points on your own, such as by staying at hotels and paying for them, then the points are considered a rebate and are not taxable. This is the case even for things like the mega-bonus promotions since they are given as rewards for paid stays.
If someone else paid for your stays, such as an employer, then the points may be taxable because you are receiving "income" without any outlay.
In the case of the 1,000,000 point contest, yes, they would be taxable because it is a sweepstakes winnings. It's not a rebate since you didn't have to spend anything to get them and it's not a gift since you actually had to do something to enter the contest.
As far as you know, is there any place where Marriott states their policy on the conditions under which they will do tax reporting associated with the awarding or use of Rewards points (other than the fine print in connection with the one million points sweepstakes that you mentioned at the beginning of this thread)?
If you received multiple copies of the same message from me, please accept my apology. I tried to post my message and got the error message "An error occurred while trying to submit your post. Please try again." I assumed it wasn't posted and I did try again (multiple times).
I called Rewards customer support to ask about their tax reporting in connection with Rewards points. I don't think they really understood the question because they tried to refer me to my tax attorney or the Marriott property where the points were earned. When I was dissatisfied with those answers, they suggested that I call Marriott's corporate offices - which I'll try to do.
No worries on the multiple posts.
As far as the terms and conditions the word tax does not appear, but this does:
Accrued Points and Miles do not constitute property of the Member. Points accrued by a Rewards Program Member are for the Member's benefit only and may not be transferred to anyone except as provided below. Points are transferable to a legal spouse or domestic partner in the case of documented death of the Member. In addition, there is a limited exception for the transfer of Points into the Rewards Account of a legal spouse or domestic partner in order to qualify for a specific Reward. See “Earn Points – Transferring Points from One Account to Another.” Points are not transferable to another person for any other reason, including divorce or inheritance. Any Points which Marriott Rewards deems in its sole discretion to have been transferred in violation of Rewards Program Terms and Conditions may be confiscated.
So if not property then perhaps not taxable? Depends I guess and I am not a tax attorney or tax preparer either.
I called Marriott's corporate offices and spoke with an executive there. He said that with the exception of the sweepstakes, Marriott's program is like other airline and hospitality loyalty programs - they don't do any reporting to the IRS either on the awarding or the use of Rewards points.