[Consolidated] 1099s for miles & cash rewards from all banks
Jan 30, 2012, 9:00 am
#317
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Jan 30, 2012, 9:21 am
#318
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Senator says quit sending IRS notices on miles
SEN. BROWN CALLS ON CITIBANK TO END DECEPTIVE FREQUENT FLIER TAX PRACTICE
Despite IRS Guidance that Frequent Flier Miles are Not Taxable, Citibank is Sending 1099 Forms to Consumers Incorrectly Stating that they Must Pay Taxes on Frequent-Flier Miles Earned by Opening Checking and Savings Accounts
WASHINGTON, D.C. – Following reports that Citibank is sending 1099 tax forms to customers who received frequent-flier miles as a reward for opening a checking or savings account, U.S. Sen. Sherrod Brown (D-OH) urged Citibank CEO Vikram Pandit to end this gratuitous practice. The Internal Revenue Service (IRS) clearly stated that frequent-flier miles are not subject to income tax.
“Americans are pinching every penny to save for a flight home from college or visit an ailing relative,” Brown said. “The last thing Citibank should be doing is creating baseless fear in middle class families, or placing a nonexistent tax burden on the backs of families who are already struggling to make ends meet.”
In a letter to Pandit, Brown asks why Citibank is sending 1099 forms to its customers and calls on the company to halt the practice.
Citibank has interpreted a rule requiring individuals to report rewards and prizes as taxable income, calculating the value of each frequent flier mile as 2.5 cents of taxable income. A 2002 ruling from the IRS clearly states that frequent-flier miles are not taxable income.
Full text of the letter is below.
January 30, 2012
Mr. Vikram Pandit
Citibank
399 Park Avenue
New York, NY 10043
Dear Mr. Pandit:
As Chairman of the Senate Banking Subcommittee on Financial Institutions and Consumer Protection, I write to express my concern regarding recent reports that Citibank is sending 1099 tax forms to customers who received frequent-flier miles as a reward for opening a checking or savings account.
During these challenging economic times, middle-class families are pinching pennies to help pay for the cost of a flight to fly home from college, visit an ailing relative, or see friends. To some, signing up for a bank account in exchange for frequent-flier miles to help make a trip more affordable is an offer that is too good to resist. However, your actions are leaving working families with the seemingly incorrect impression that when they rack up miles, they are hiking up their taxes, too.
Citibank arbitrarily calculates the value of each frequent flier mile as 2.5 cents of taxable income. Based upon its incorrect interpretation of a rule requiring individuals to report rewards and prizes as taxable income, Citibank has been sending its customers 1099 tax forms to report their frequent-flier miles. A spokesperson stated that the bank is following instructions from the 2012 Internal Revenue Code, and that income tax must be paid if at least $600 in “prizes and awards” is received. These miles are neither a prize nor an award.
Furthermore, the Internal Revenue Service (IRS) has made clear that frequent-flier miles are not taxable income. In a ruling made in 2002 – which still stands – the IRS highlighted that frequent-flier miles are not subject to income tax due to the “numerous technical and administrative issues relating to these benefits.” Furthermore, the IRS stated that it “will not assert that any taxpayer has understated his federal tax liability by reason of the receipt or personal use of frequent-flier miles or other in-kind promotional benefits attributable to the taxpayer’s business or official travel.”
Most importantly, given the IRS’s ruling, why is Citibank sending its customers 1099 tax forms? Reporting frequent-flier miles as taxable income is inconvenient to consumers, raises their anxiety unnecessarily, and is not required by law.
I urge Citibank to halt this practice. The last thing Citibank should be doing is creating baseless fear in middle class families, or placing a nonexistent tax burden on the backs of families who are already struggling to make ends meet.
Thank you for your consideration of this matter.
Sincerely,
Sherrod Brown
United States Senator
Despite IRS Guidance that Frequent Flier Miles are Not Taxable, Citibank is Sending 1099 Forms to Consumers Incorrectly Stating that they Must Pay Taxes on Frequent-Flier Miles Earned by Opening Checking and Savings Accounts
WASHINGTON, D.C. – Following reports that Citibank is sending 1099 tax forms to customers who received frequent-flier miles as a reward for opening a checking or savings account, U.S. Sen. Sherrod Brown (D-OH) urged Citibank CEO Vikram Pandit to end this gratuitous practice. The Internal Revenue Service (IRS) clearly stated that frequent-flier miles are not subject to income tax.
“Americans are pinching every penny to save for a flight home from college or visit an ailing relative,” Brown said. “The last thing Citibank should be doing is creating baseless fear in middle class families, or placing a nonexistent tax burden on the backs of families who are already struggling to make ends meet.”
In a letter to Pandit, Brown asks why Citibank is sending 1099 forms to its customers and calls on the company to halt the practice.
Citibank has interpreted a rule requiring individuals to report rewards and prizes as taxable income, calculating the value of each frequent flier mile as 2.5 cents of taxable income. A 2002 ruling from the IRS clearly states that frequent-flier miles are not taxable income.
Full text of the letter is below.
January 30, 2012
Mr. Vikram Pandit
Citibank
399 Park Avenue
New York, NY 10043
Dear Mr. Pandit:
As Chairman of the Senate Banking Subcommittee on Financial Institutions and Consumer Protection, I write to express my concern regarding recent reports that Citibank is sending 1099 tax forms to customers who received frequent-flier miles as a reward for opening a checking or savings account.
During these challenging economic times, middle-class families are pinching pennies to help pay for the cost of a flight to fly home from college, visit an ailing relative, or see friends. To some, signing up for a bank account in exchange for frequent-flier miles to help make a trip more affordable is an offer that is too good to resist. However, your actions are leaving working families with the seemingly incorrect impression that when they rack up miles, they are hiking up their taxes, too.
Citibank arbitrarily calculates the value of each frequent flier mile as 2.5 cents of taxable income. Based upon its incorrect interpretation of a rule requiring individuals to report rewards and prizes as taxable income, Citibank has been sending its customers 1099 tax forms to report their frequent-flier miles. A spokesperson stated that the bank is following instructions from the 2012 Internal Revenue Code, and that income tax must be paid if at least $600 in “prizes and awards” is received. These miles are neither a prize nor an award.
Furthermore, the Internal Revenue Service (IRS) has made clear that frequent-flier miles are not taxable income. In a ruling made in 2002 – which still stands – the IRS highlighted that frequent-flier miles are not subject to income tax due to the “numerous technical and administrative issues relating to these benefits.” Furthermore, the IRS stated that it “will not assert that any taxpayer has understated his federal tax liability by reason of the receipt or personal use of frequent-flier miles or other in-kind promotional benefits attributable to the taxpayer’s business or official travel.”
Most importantly, given the IRS’s ruling, why is Citibank sending its customers 1099 tax forms? Reporting frequent-flier miles as taxable income is inconvenient to consumers, raises their anxiety unnecessarily, and is not required by law.
I urge Citibank to halt this practice. The last thing Citibank should be doing is creating baseless fear in middle class families, or placing a nonexistent tax burden on the backs of families who are already struggling to make ends meet.
Thank you for your consideration of this matter.
Sincerely,
Sherrod Brown
United States Senator
Jan 30, 2012, 9:25 am
#319
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Location: DFW
Posts: 1,145
I'm not sure what others are doing with their 1099's they get, but when I file my taxes, I plan on sending a copy of the IRS ruling in along with the 1099-MISC that i get from Citi and tell them this is why i did not include it on my taxes. To me, they now have proof of why it is not showing, as opposed to just ignoring it. Will it help and not get me audited? Who knows, but i figure it is worth a try.
Jan 30, 2012, 9:33 am
#320
Join Date: Oct 2004
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On one hand, it's nice to see someone with a loud enough microphone make a stink about this.
On the other hand, it doesn't inspire confidence in our elected leaders when they completely misinterpret and misstate the 2002 IRS statement clearly entitled, "Frequent Flyer Miles Attributable to Business or Official Travel."
On the other hand, it doesn't inspire confidence in our elected leaders when they completely misinterpret and misstate the 2002 IRS statement clearly entitled, "Frequent Flyer Miles Attributable to Business or Official Travel."
Jan 30, 2012, 9:40 am
#322
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Jan 30, 2012, 9:52 am
#323
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Jan 30, 2012, 9:57 am
#324
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Pandit is a crook and facilitator of the financial meltdown - he should be in prison, not CEO of Citibank.
I still like the idea of everyone filing Small Claims cases against Citi - they would be out hundreds of thousands in legal fees just answering the suits even if they get dismissed.
I still like the idea of everyone filing Small Claims cases against Citi - they would be out hundreds of thousands in legal fees just answering the suits even if they get dismissed.
Jan 30, 2012, 11:21 am
#326
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Yes, and special statutes and regulations apply to bank deposits that do not apply to credit card accounts.
Interestingly, though, Citi issued these 1099-MISCs on the ground that the miles were a taxable "prize or award" -- not taxable interest reported on a 1099-INT. There are lot of different and conflicting ideas floating around in this thread, but I doubt anyone here agrees that this is a prize or award.
The main debate here is whether this is taxable interest, and if so, what is the appropriate value for the miles.
Interestingly, though, Citi issued these 1099-MISCs on the ground that the miles were a taxable "prize or award" -- not taxable interest reported on a 1099-INT. There are lot of different and conflicting ideas floating around in this thread, but I doubt anyone here agrees that this is a prize or award.
The main debate here is whether this is taxable interest, and if so, what is the appropriate value for the miles.
Jan 30, 2012, 11:25 am
#327
Join Date: Dec 2008
Posts: 563
See this related thread:
http://www.flyertalk.com/forum/miles...ces-miles.html
Here is the source:
http://brown.senate.gov/newsroom/pre...8-D81C8A591596
http://brown.senate.gov/imo/media/do...k%20Letter.pdf
http://www.flyertalk.com/forum/miles...ces-miles.html
Here is the source:
http://brown.senate.gov/newsroom/pre...8-D81C8A591596
http://brown.senate.gov/imo/media/do...k%20Letter.pdf
Jan 30, 2012, 11:32 am
#328
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See this related thread:
http://www.flyertalk.com/forum/miles...ces-miles.html
Here is the source:
http://brown.senate.gov/newsroom/pre...8-D81C8A591596
http://www.flyertalk.com/forum/miles...ces-miles.html
Here is the source:
http://brown.senate.gov/newsroom/pre...8-D81C8A591596
Jan 30, 2012, 11:36 am
#329
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On one hand, it's nice to see someone with a loud enough microphone make a stink about this.
On the other hand, it doesn't inspire confidence in our elected leaders when they completely misinterpret and misstate the 2002 IRS statement clearly entitled, "Frequent Flyer Miles Attributable to Business or Official Travel."
On the other hand, it doesn't inspire confidence in our elected leaders when they completely misinterpret and misstate the 2002 IRS statement clearly entitled, "Frequent Flyer Miles Attributable to Business or Official Travel."
Jan 30, 2012, 11:43 am
#330
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See this related thread:
http://www.flyertalk.com/forum/miles...ces-miles.html
Here is the source:
http://brown.senate.gov/newsroom/pre...8-D81C8A591596
http://brown.senate.gov/imo/media/do...k%20Letter.pdf
http://www.flyertalk.com/forum/miles...ces-miles.html
Here is the source:
http://brown.senate.gov/newsroom/pre...8-D81C8A591596
http://brown.senate.gov/imo/media/do...k%20Letter.pdf
(But I wonder if Sen. Brown is misreading the 2002 IRS ruling..)