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.)