He writes, “I am part of an small invitation only discussion group between Citi and AA where they ask questions and send out surveys..”
And shares this two question survey:
Have any of your miles credit cards sent you a 1099 tax notice for miles that were rewarded to you? Select all that apply.
Have any of your points credit cards sent you a 1099 tax notice for points that were rewarded to you? Select all that apply.
Don’t freak out just yet! This new survey doesn’t raise alarms, in my view.
A 1099 just informs the IRS of a transaction. Citibank does not determine what is taxable. It’s fairly well-established that the miles or points awarded for credit card spend are not taxable transactions.
Now, when you sign up for a Citibank checking account bonus, and the value of the bonus exceeds $600, you risk receiving a 1099 which is just reporting to the IRS on the value they’ve provided to you. Citi’s approach in the past was to view bank account rewards as tax-reportable.
When you redeem Citibank Thank You points earned from a bank account signup bonus, a 1099 may be generated.
You don’t have to agree with the valuation, you can dispute the value. But the notion that rewards from bank accounts can be considered income isn’t new.
That’s different than asserting that frequent flyer miles generated by credit card spending or travel are tax, or that they’re required to be reported to the IRS.
- Miles from your personal travel represents a rebate, it’s returning money (value) to you that was already yours and ostensibly already taxed.
- Miles from credit card spend are a rebate on that spending.
- The IRS has asserted that it will not attempt to tax miles earned for business travel, even though that’s not a rebate on your own spending. (IRS Commissioner’s Announcement 2002-18, 2002-1 C.B. 621)
None of this suggests that the tax treatment of these items will not ever change. And there are certainly still grey areas — such as credit card signup bonuses. Those that require minimum spend could be construed to be a rebate on that spend. Those that are awarded on card approval might be on shakier tax ground, though the IRS to date has shown little inclination to address this. (Although revenue recognition by loyalty programs themselves is a live issue at the IRS.)
- You can join the 40,000+ people who see these deals and analysis every day — sign up to receive posts by email (just one e-mail per day) or subscribe to the RSS feed. It’s free. You can also follow me on Twitter for the latest deals. Don’t miss out!
How much of your blog related travel expenses are deductible as business expenses from U..S income tax and thus are subsidized by the U.S. government? Is that a benefit someone who might be thinking of starting a travel blog should take into consideration?
@Stuart If Blog related travel expenses are deductible they are deductible from earned income of that blog. Therefore tax paid on that earned income. That tax therefore help pays for the frequent vacations of the President who keeps flying to Hawaii for his vacation. Business expenses are not considered subsidized the by the US government. There would be no such expense if there was no business generating taxable income.
So those 50,000 us air miles I got for no spending requirement could be taxable I guess but to me the value was $89 for the annual fee and a rebate.
I don’t think the IRS will ever want to open up that can of worms. If miles earned are taxed, then they will have to let you deduct the value of the miles when you redeem them, and miles are not currency where you can easily assign a valuation. The IRS doesn’t even have the man power to monitor the chaos that miles and points valuation would bring to the table. That’s not where the real money is when it comes to IRS audits.
If the amount is $600 or more they have to send a 1099. But in fact they do it for the Citi $300 checking account bonus already.
I just received a 1099 from Chase for a $175 bonus.
As long as they keep sending 1099s for application commissions paid to website marketers (which they do), all is at least somewhat well in the world.
I am attorney and at http://bit.ly/NonprofitLaw I deal with a lot of tax issues. The only basis that the IRS could claim that something like the sign-up bonus is taxable is that it is not a “gift”. The Internal Revenue Code at section 102(a) provides that gifts are
not income. “Gross income does not include the value of property acquired by gift…”
http://codes.lp.findlaw.com/uscode/26/A/1/B/III/102
For credit cards that have the first annual fee waived, the tax-payer has not given anything of value in return for the value of the 25,000 – 50,000 miles given by the bank. Therefore, the miles is a gift from the Bank to the taxpayer.
It’s more Obama’s anti-white war on fliers. Taxes, taxes, taxes, and then give what’s stolen to his ghetto folk, like his green-lipped, interviewing freak that swims in milk and fruit loops.
She’s gonna take your seat, and then you get the Obama white-tax.
The IRS commented on this in Announcement 2002-18 so unless they change this, which is most unlikely, this rule can still be relied upon.
Frank stop providing inaccurate tax advice. If you got a 1099-MISC for $175 we want to see it.
At least $600 in rents, services, prizes and awards, other income payments, medical and health care payments, crop insurance proceeds, cash payments for fish you purchase from anyone engaged in the trade or business of catching fish, or, generally, the cash paid from a notional principal contract to an individual, partnership, or estate;
Ed this has NOTHING to do with Obama! Get over it Romney LOST!
I have 25+ years of professional experience in the Income tax field.
Not related to citi, but the $400 checking and savings account signup bonus from Chase … Just got a 1099 in be mail! Ugh. I hate these.