EsquireFlyer

Jeez. You'd think Citi would have worked out a system to track this if it already happened a few years ago. It shouldn't be that hard conceptually (just takes some time to set up the logistics)--do it FIFO, or proportionally, or any other system as long as there is a system.

It shouldn't be harder than figuring out your basis in stock that you sell, when you make a partial sale of a stock that you bought in multiple chunks at different prices.

raj_cl

I see lot of academic discussion on this thread...which is great.

Just checking if people can share specifically how have they treated the Citi 1099s on their tax returns for this year i.e. reporting the amount originally mentioned on the 1099, or reporting a lesser amount but greater than zero, or reporting zero, or totally disregarding the 1099?

Thanks in advance...maybe we can keep this thread alive, to see what specifically have people done, and then if/when do they get any queries from IRS...would be good tangible evidence to further substantiate the academic discussion.

hotelmotel

I will likely be putting a FMV adjustment under Other Income on Line 21. What the adjustment will be, I have not decided just yet.

MilesTalk

I just got off the phone with Citi.

We figured out why they are taxing me - but it's because Citi is wrong. She of course said they re right ;-)

My credit card offered a promo of 5 points per dollar last year, which I took advantage of to about 200,000 points.

They have now advised me that BONUS points earned on a Citi CREDIT CARD are considered taxable income. So the 1 purchase point was not, the 4 bonus points were.

Any thoughts on my next move? They seem really set on sticking it to the customer on this one....

Andy2

I think that is a great idea, but just keep in mind that the IRS correspondence system for "mis-matches" is a loooong process. The IRS usually sends matching notices withing one year of the return filing date, but many such notices are generated 1-2.5 years after the filing date, particularly when the amounts aren't large. I mention this because one poster said he reported an amount on his tax return lower than the amount on the 1099 without using the recommended method of showing the gross amount and reducing it by a FMV adjustment, and this poster indicated that he didn't receive a notice from the IRS. Others thought this was meaningful, but I'm not so sure, since he may yet receive a matching notice.

Andy2

If they started taking this position it would change everything. You did in fact make purchases with the credit card in order to get the bonus miles. The rebate rule says you reduce the basis of the items you bought with the card, rather than directly reporting the value of the miles as immediate taxable income. It sounds like the Citi rep. was just making something up that sounded good to him or her.

MilesTalk

I would agree about the making things up part - except if you take what she said as true, it seems to match up with their figures for taxable vs non-taxable. She also insisted there was nobody higher than her to take it up with, but that I was welcome to call the Premier card line and take it up with them.

I would think most people wouldn't wind up in this position since it's so hard to even tell what is taxable when you get a 1099 - but given my massive bonus points on that promo, it becomes clear.

Clearly, given the IRS positions, Citi is taking the wrong line here.

What I would love would be if someone had the number or email of someone senior enough at Citi to *really* investigate this. (PM is fine). Else I continue to weigh how much time I want to spend on this in principle.

EsquireFlyer

It also sounds like Citi phone reps are dispensing legal advice without a law license.

Andy2

Here is what I could find for reference for the rebate rule. I can't find a full text of Rev. Rul 84-41 for some reason. Maybe a better googler can help. Don't get too bored with the letter ruling, just go to the bottom section for the conclusion. I see no reason that "bonus" miles should be treated differently than "regular" miles from credit card spending under the rebate rule, but that is just my opinion.

http://www.bankrate.com/brm/itax/tax...20051027a1.asp

http://www.moneybluebook.com/are-cre...axable-income/

http://www.irs.gov/pub/irs-wd/0228001.pdf

http://www.bradfordtaxinstitute.com/..._Rul_76-96.pdf

The address on my 2010 corrected 1099-MISC from Citi (I was one of the few who got the income reduced to $0.00) was as follows:

Citibank, N.A.
425 Park Avenue, 7th Floor
c/o Corporate Tax Department
New York, NY 10022

Personally, if I were going to argue that Citi is improperly interpreting the tax law, I would want to argue with the tax department, but other may disagree.

MilesTalk

Nah - wouldn't go that far. She is towing the line she's been given. The problem is that someone in Citi ruled this (or *said* they ruled this) and the rep is taking the line. In finance, they don't get much discretion.

Remember this is someone calling me back from the department that handles 1099s, not a front line rep.

MilesTalk

That was all great stuff. What I'd love is the NAME of someone on Park Ave to address a letter to. Heck, I'd take a walk over and chat it out

Andy2

Sorry, I don't have a name. Interesting that you are so close to them. I wonder if they have a receptionist on the 7th floor that could provide you with a name or schedule an appointment?

Hi5z

If my earning in 2011 were exactly the same as 2010 and if I got $1000 income tax refund for 2010. How much will my $750 from 1099-misc affect my income tax refund for 2011? and also why did i receive $750 1099-misc for 20,000 AA miles receive in 2011 while other posters got $500 1099-misc for same amount miles received?

dhuey

Perhaps that is so. Those receiving any such advice should consider the bias of the source and treat the tax law advice to be worth exactly how much you are paying for it.

MilesTalk

You'd need an appt to get past security...