Originally Posted by
CollegeFlyer
First, I think the conclusion "If they are properly complying with the tax laws, they must be valuing the miles at $0.00 per mile" is internally self-contradictory.
I agree completely, and find this entire post to be an excellent summary of the situation. Regarding a couple of the points:
2. Related to #1, they may, like Citibank apparently is, be confusing the 1099-INT with the 1099-MISC, and be applying the wrong threshold. The reason that some people have speculated for Citi's use of the 1099-MISC (have to try out a service) is not convincing to me as a legal justification. I think it was just a mistake.
Interestingly, the use of 1099-MISC has changed for 2011. For 2010 it appears (from FT postings) that Citibank was consistently issuing 1099-INT for interest-bearing accounts and 1099-MISC only for non-interest-bearing accounts. I personally received a 1099-INT for opening a savings account. This makes it less plausible that Citibank is now making a simple mistake. Perhaps they believe they have enough justification to use 1099-MISC, and figured that with the higher threshold it would lead to fewer complaints than last year. If so, they miscalculated. :-)
3. They may be assuming, as Senator Brown did, that the IRS has stated that it will not seek to tax any miles, even though they have value, because of the administrative burden.
Even if they fully understand that IRS ruling, they may be assuming that the same logic would apply in this other situation. The ABA (American Bankers Association) has provided precisely this guidance to its members. See post #146 in this thread.