dhuey

Any guesses here on what Citi and the IRS will do in the coming weeks?

My guesses:

1) Citi will correct the 1099-MISCs on the ground that the miles are not actually prizes or awards.

2) Citi will very publicly seek guidance from the IRS on whether it needs to issue 1099-INTs for these miles.

3) The IRS will have a helluva internal debate about whether to go the "administratively difficult" route of the 2002 announcement and declare that miles related to bank deposits are tax-free, or whether to apply existing law/regs and say that the miles are taxable at FMV.

4) The IRS will cave to political pressure and go the way of the 2002 announcement and greatly expand the tax-free nature of miles issued by financial institutions. (I'm not so confident of this part).

josephstern

Wow - I might have to think about re-filing my 2010 taxes if we get some action here.

dhuey

You might, and everyone who has one of these 1099-MISC should definitely wait to file their 1040 unless they have a big refund coming and they need the cash soon. Citi will not ignore this senator and the IRS will not ignore the senator and Citi. We don't know what Citi or the IRS will do, but this is now very much in play politically.

N_Phoenix

I think we should all take a little time and send a thank you to Sen Brown. Along with some encouragement to follow through.

CodeAdam10

I do wonder if all this publicity around sign-up bonuses (miles) will result in a good ending. It might give the IRS "ideas" to start taxing all these miles for good.

Andy2

I couldn't find the very good article that provided guidance on the subject of 1099-INT versus 1099-MISC, but here is "lesser" article:

http://www.fblg-cpa.com/Library/Tax/...Which-1099.php

There is a banker named John Burnett that responded to this type of question in a banking blog and he provides similar guidance in better terms. I can't copy just his response, so here is the page:

http://www.bankersonline.com/forum/u...Number=1243586

I tend to think Citi was correct in issuing a 1099-MISC for the checking accounts because I remember that the terms & services required the customer to "do something" or "try something" like online bill pay or direct deposit to get the miles. (Of course, since I think the amount of income is less than $600, they shouldn't have issued the 1099-MISC at all, so I am saying the filing requirement is for the 1099-MISC instead of the 1099-INT).

Citi did issue 1099-INTs in 2010 when they issued miles from the mere opening of a savings account that required no action on the part of the customer.

JATR4

Now is the time for all good men (Senator Brown) to come to the aid of their country (frequent flyers).

The letter from Senator is good (probably) news. I urge each and every one of you who received either a 1099-INT or 1099-MISC to call Cit and request a corrected 1099; request a zero value since no 1099 was necessary. If the CSR won't help, ask for a supervisor. Call every day until you get satisfaction. Call several times a day if at all possible. Tie up their phones. They deserve our consternation.

Let us know if there is any progress.

Note: If these 1099s are deemed to be incorrect then it may be time for amended returns for previous years. Probably only cost effective for those who prepare threir own returns.

josephstern

At the very least, if there's no further action, I plan to file with a zero, and with an attachment stating my case and pointing to that letter (which I have as a PDF).

If enough of us do that, the IRS might just ignore the whole thing.

dhuey

I think that energy would be better directed toward members of Congress. Citi is probably just going to punt this over to the IRS and seek guidance. The IRS might be receiving guidance as well -- from members of Congress with oversight responsibilities, from White House staffers, etc.

dhuey

Online bill pay or direct deposit was a condition for getting the miles? Are you sure? I can't find any working links to the T&C.

jjmiller69

Way to go, Ohio can be proud of there Senator. ^

Andy2

I distinctly remember that both times I did this checking account offer (2008 and 2010 - they didn't enforce the one-offer per customer limit), I had to do either direct deposit or make 2 online payments a month, I paid my water bill and my Sprint long-distance bill each month because those were my smallest bills. I wouldn't have paid those bills using Citi if I didn't have to because I had to transfer money in from ING. In other words I opened the Citi account just to get the miles and I didn't do anything with the account that I didn't have to do.

JATR4

Good idea. But my idea is to inconvenience Citi to the point that they can't do their regular phone business. Money talks--and in this case, time is money.

Make them (Citi) pay.

EsquireFlyer

But that's mutual destruction...your time is money too.

dhuey

Even if this is required for the miles, are the miles really a bonus for signing up for bill pay or direct deposit? Citi might want customers to sign up for those things, but what they really want is the money. Regardless, I doubt this meets the tax definition of "prize or award". That strikes me as more of a lottery/raffle/accolade concept.