Is Citi going to send IRS 1099 for points/miles earning for CC bonuses / spend?
 

I am part of an small invitation only discussion group between Citi and AA where they ask questions and send out surveys to users - some sort of on the ground market research. I recently received a survey about 1099's which, frankly, scared the hell out of me. They asked only a few questions after asking us to pick which cards we had:

I obviously answered no to all of that and voiced my concerns strongly against that in the comments. Has anyone else heard of something like this? I think we may need to preemptively stop something like this happening as best we can.

Edit - we know this already happens for bank account bonus points but these questions were about points from credit card spend and signup bonuses.

I just hand these to my accountant. Taxes are a fact of life. I'd rather pay more taxes and have a lot more income that vice versa.

Citibank is already doing this in some cases. Read this tax case that the IRS won in 2014 and you will understand more:

https://www.ustaxcourt.gov/InOpHisto...ern.TC.WPD.pdf

Here is a link to an article about this decision:

http://www.forbes.com/sites/kellyphi...d-by-citibank/

My reading of this is that when Citi decided to send 1099s for "Thank you points" they basically made the decision that this was income. The failure to report the income from a 1099 is what most likely caused this issue.

This is different - we knew Citi sends them for bank accounts, but these questions were targeted to credit card signup bonus and spend - something they don't send 1099s for now.

The case was about their 2009 tax return. They did receive a 1099 and if you read the case Citi didn't help the tax payer in the least bit.

Sure but they can "basically make the decision" that card points should be income as well and the IRS is likely to back them. A grey area thus becomes rather black and white. There are many voices that are pushing for that (for good reasons) and others that are pushing against it (for good reasons).

The first card issuer to make this decision without being forced to by the IRS will see it's card business go down the sewer if everyone doesn't follow suit.
Not sure why Citi would want to do this on their own motion. This is one of the few perks shared by everyone and for a card issuer to make the decision on their own would be condemned by everyone with a frequent flyer/hotel/ or other loyalty program.

Sadly, having once practiced law, I have met my share of C level attorneys but I have a hard time seeing this as a by product of someone down the food chain making this type of decision on their own.

I spent a few minutes digging into this on the internet and this apparently started on a travel blog (View from the Wing) where they were discussing a change to the accounting procedures for recognizing income at the card issuer level. The part about taxing the individual appears to me to be speculation as to what might happen down the road if they do that by others.

Last August's Tax Court case had nothing to do with airline miles earned from credit card issuers, either sign-up bonus miles or miles earned on monthly purchases. They were Citibank points awarded for a deposit account.

"Free" toasters handed out for opening a bank account have always been income, and the airline ticket in this case was no different.

Will Citi take the position that AAdvantage miles awarded by Citi on AA-branded credit cards are reportable income? Who knows?

One thing is certain: The Tax Court case linked above is irrelevant to the issue of credit card miles.

For tax policy as of today you are correct. They are unconnected. As for corporate internal policy debate you are incorrect.

The thank you points on deposit accounts are considered interest earned.

So far the credit bonuses are considered rebates.

If 1099 becomes norm, I don't think the mileage programs will last too long because there will be a reduction in demand of miles from banks, and less income generated from selling miles by the airlines.

Pretty much bad for everyone.

If Frequent Flyer schemes went back to their roots as schemes rewarding people for travel rather than frequent spending at supermarkets et al, I don't see that it would be bad for everybody

Wouldn't that be something, eh?