Citibank deems frequent-flier miles taxable, but does the IRS?

[MonkeyMama]

Wow!!!

Citibank deems frequent-flier miles taxable, but does the IRS? - latimes.com

Basically, Citibank is issuing 1099s for airline miles, valuing them at 2.5 cents per mile.

For reference, I am a tax professional. The IRS has stated clearly that credit card rewards are not taxable income, over the years. *Particularly* when it comes to miles, which are hard to value. Which is why I think they just never bothered to pursue any credit rewards. (& let's face it, the credit card companies have the legislators in their pockets - more to the point - Citibank's accountants missed that memo?).

So, what the hell Citibank???

If any of my clients receive a 1099 for airline miles, I will probably just advise they report it. It will depend on the amount. They would pay us more to fight it, is the reason. 1099s are really hard to dispute if you can't get the issuer to change them. Boy, this could get interesting!!

[SnoopyCool]

How lovely of Citibank! I haven't seen one of those this season, yet. Thanks for the heads-up.

[JoshuaHeckathorn]

Way to go Citi! Thanks for nothing...luckily, I haven't received any 1099s for credit card rewards yet.

[JoshuaHeckathorn]

FYI, an IRS representative said this the other day: “When frequent flier miles are provided as a premium for opening a financial account, it can be a taxable situation subject to reporting under current law.”

I blogged about this on Creditcents in more detail yesterday, but basically what the IRS is saying is credit card sign-up bonuses are considered income while points earned when making purchases with your credit card still remain tax free.

[Joan.of.the.Arch]

ABC news radio reported this this morning, and also said they were reporting hotel credits to IRS.

[AsiaTraveler]

Please note: at this time, Citibank is issuing 1099's for miles earned for opening BANK accounts, not credit cards.