We have a reward program that gives a non-employee designer points for each cabinet he sells which can be redeemed for prizes or gift cards. Should this be reported, and how?


We assume these points are an incentive to the designer to promote master brand cabinets to his design clients. If the client selects master brand, you reward the designer points.

The Instructions for Form 1099-MISC, on page 7 under “Box 7. Nonemployee compensation” supports your position, assuming that the fair market value of the points is $600 or more. In the course of your business, you are compensating the designer by awarding redeemable points in exchange for the designer’s services of promotion of your product. According to these instructions, it appears you have a responsibility to report the fair market value of the point award as nonemployee compensation for services.  

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