[Consolidated] 1099s for miles & cash rewards from all banks
Mar 28, 2012, 6:17 pm
#631
FlyerTalk Evangelist
Join Date: Jul 2003
Location: Florida
Posts: 29,762
Please provide solid evidence other than here-say about your assertion on how TYPs are being treated for tax reporting purpose.
The only thing we all know for 100% certainty is, TYPs earned from banking products are taxable - that is not new, it has been this way from almost day one, like 4 years ago.
Which one you know based on first hand knowledge?
There is one post about HSBC revised its 1099's to reflect bonus earned, again, from opening bank account.
There is no report about points earned from CC has been treated as taxable, bonus or non bonus.
Citi cannot report a write-off on the FMV reported on 1099's UNLESS Citi actually INCURRED the same COST for those points. Nobody is stupid enough to think Citi actually incurred the same cost for the TYPs / Miles they awarded, isn't it? Then why would people be so stupid to claim that Citi purposely do the 1099's so it can write it off as expenses?
At the maximum, Citi could only write off the ACTUAL cost incurred to acquire points/miles for distribution - that we all know it isn't the 0.025 per mile figure.
Mar 29, 2012, 7:35 am
#632
Original Member
Join Date: May 1998
Posts: 1,139
Other than one poster mentioned about he was being told the bonus points are taxable, we have not heard from anyone else that their bonus earning are taxable. I have TYP bonus earnings in 2010, 2011, do not receive any 1099's from Citi.
Please provide solid evidence other than here-say about your assertion on how TYPs are being treated for tax reporting purpose.
The only thing we all know for 100% certainty is, TYPs earned from banking products are taxable - that is not new, it has been this way from almost day one, like 4 years ago.
Which one you know based on first hand knowledge?
There is one post about HSBC revised its 1099's to reflect bonus earned, again, from opening bank account.
There is no report about points earned from CC has been treated as taxable, bonus or non bonus.
Your claim here demonstrates a total lack of knowledge of general accounting principles.
Citi cannot report a write-off on the FMV reported on 1099's UNLESS Citi actually INCURRED the same COST for those points. Nobody is stupid enough to think Citi actually incurred the same cost for the TYPs / Miles they awarded, isn't it? Then why would people be so stupid to claim that Citi purposely do the 1099's so it can write it off as expenses? At the maximum, Citi could only write off the ACTUAL cost incurred to acquire points/miles for distribution - that we all know it isn't the 0.025 per mile figure.
Please provide solid evidence other than here-say about your assertion on how TYPs are being treated for tax reporting purpose.
The only thing we all know for 100% certainty is, TYPs earned from banking products are taxable - that is not new, it has been this way from almost day one, like 4 years ago.
Which one you know based on first hand knowledge?
There is one post about HSBC revised its 1099's to reflect bonus earned, again, from opening bank account.
There is no report about points earned from CC has been treated as taxable, bonus or non bonus.
Your claim here demonstrates a total lack of knowledge of general accounting principles.
Citi cannot report a write-off on the FMV reported on 1099's UNLESS Citi actually INCURRED the same COST for those points. Nobody is stupid enough to think Citi actually incurred the same cost for the TYPs / Miles they awarded, isn't it? Then why would people be so stupid to claim that Citi purposely do the 1099's so it can write it off as expenses?
At the maximum, Citi could only write off the ACTUAL cost incurred to acquire points/miles for distribution - that we all know it isn't the 0.025 per mile figure.Strictly speaking, I believe they can deduct the miles at FMV, but if that FMV exceeds basis, Citi has to make a journal entry to record taxable income for the difference, making the net deduction Citi's cost of the miles. So most banks would just deduct the cost of the miles on the tax return and not bother with the journal entry.
Mar 29, 2012, 7:53 am
#633
Join Date: Nov 2011
Posts: 30
The tax concepts being discussed should be equally applicable to miles received from opening any bank or brokerage account (excluding credit card accounts).
Citi is the only financial institution that appears to have issued a Form 1099 for the account opening bonus paid in the form of miles or points. The lack of a Form 1099 doesn't, of course, mean something is not taxable. But the receipt of the Form 1099 causes the recipient to have to address the issue since the IRS gets a copy of the Form 1099. You can peruse numerous prior threads with different opinions as to why other financial institutions have not issued Forms 1099 in the exact same factual circumstances.
A long time ago a mutual fund that awarded frequent flier miles to investors in the mutual fund was instructed by the IRS in a letter ruling to inform the investors as to the FMV of the miles so the recipient could reduce his or her tax basis in the mutual fund. This might not result in current taxation but would likely increase tax liability in future years when the holder sold the mutual fund shares. It could be presumed (but no one knows for a fact) that the mutual fund was American Beacon and it would be interesting to know what value, if any, American Beacon assigned to the AA miles. This information would have been in the annual communication to investors but it would have been a long time ago, and no one seems to know what value might have been assigned.
Citi is the only financial institution that appears to have issued a Form 1099 for the account opening bonus paid in the form of miles or points. The lack of a Form 1099 doesn't, of course, mean something is not taxable. But the receipt of the Form 1099 causes the recipient to have to address the issue since the IRS gets a copy of the Form 1099. You can peruse numerous prior threads with different opinions as to why other financial institutions have not issued Forms 1099 in the exact same factual circumstances.
A long time ago a mutual fund that awarded frequent flier miles to investors in the mutual fund was instructed by the IRS in a letter ruling to inform the investors as to the FMV of the miles so the recipient could reduce his or her tax basis in the mutual fund. This might not result in current taxation but would likely increase tax liability in future years when the holder sold the mutual fund shares. It could be presumed (but no one knows for a fact) that the mutual fund was American Beacon and it would be interesting to know what value, if any, American Beacon assigned to the AA miles. This information would have been in the annual communication to investors but it would have been a long time ago, and no one seems to know what value might have been assigned.
I haven't gone the way of a Citi bank account but have one with CapOne that had a 25K bonus (if I remember correctly). Would your advise be to steer clear of all bank accounts with bonuses or just Citi? Doesn't seem worth the fight or confusion to me.
Mar 29, 2012, 10:39 am
#635
formerly known as daveland
Join Date: Oct 2003
Location: NY, NY, USA
Programs: Hyatt Globalist, Marriott LTP, Delta Platinum, Hilton Honors Diamond, Wyndham Diamond
Posts: 2,969
If you split this up into two years for redemption, or don't redeem higher than 1c/point, you shouldn't get 1099ed at all. Unless Citi changes the practice of not 1099ing under $600...
Rule of thumb:
--------------
AAdvantage miles are taxed in the tax year accrued, at 2.5c/mile, regardless of when/if/how you use the miles.
Thank You points are taxed in the tax year redeemed, based on actual redemption value.
Mar 29, 2012, 11:36 am
#637
formerly known as daveland
Join Date: Oct 2003
Location: NY, NY, USA
Programs: Hyatt Globalist, Marriott LTP, Delta Platinum, Hilton Honors Diamond, Wyndham Diamond
Posts: 2,969
Mar 29, 2012, 12:41 pm
#638
Formerly known as CollegeFlyer
Join Date: Jan 2004
Location: JRA
Programs: UA 1K MM, AA PLT, Hyatt Diamond, Marriott Gold, Hertz 5*
Posts: 6,716
Because theoretically, the $500 TYP redemption would still be taxable income, but Citi just wouldn't report the income to the IRS because it was under $600. So you could probably get away with it, but it's not legally tax-exempt.
Mar 29, 2012, 1:20 pm
#639
Original Member
Join Date: May 1998
Posts: 1,139
WOW... this is very helpful. I had never heard of being taxed for award points but am so glad that I have read your posts here. It seems that you and daveland have researched this topic thoroughly.
I haven't gone the way of a Citi bank account but have one with CapOne that had a 25K bonus (if I remember correctly). Would your advise be to steer clear of all bank accounts with bonuses or just Citi? Doesn't seem worth the fight or confusion to me.
I haven't gone the way of a Citi bank account but have one with CapOne that had a 25K bonus (if I remember correctly). Would your advise be to steer clear of all bank accounts with bonuses or just Citi? Doesn't seem worth the fight or confusion to me.
I think many posters make too big of a deal out of making a simple negative "Prize FMV adjustment" on their tax returns if someone believes the issuer has overvalued the amounts on the Form 1099. If a correspondence audit for that item occurs, the taxpayer has to be able to submit documentation justifying the lower value used on the return, but many posters act like a government SWAT team is going to attack their house or something. Realistically, in my opinion, I dount that too many correspondence audits are going to occur for these small amounts. The complications are more likely to occur if a Form 1099 is received but the amount reflected on that Form 1099 is omitted entirely from the tax return.
If miles for opening a bank account is a good deal, I would not hesitate to open the account.
Mar 29, 2012, 3:37 pm
#640
formerly known as daveland
Join Date: Oct 2003
Location: NY, NY, USA
Programs: Hyatt Globalist, Marriott LTP, Delta Platinum, Hilton Honors Diamond, Wyndham Diamond
Posts: 2,969
Update
All,
I have a happy ending to report. With great pains, a helpful Citigold rep conferencing in a helpful Thank You rep, I have finally gotten to the bottom of things after 1.5 months of constantly trying to sort it all out. Apparently at some point in early 2011, I was given bonus TY points as a gift from my banker. Those were missed by everyone until now.
The problem was that over and over, reps were explaining to me, in some cases adamantly, that this was the result of my credit card bonus points. Since I couldn't find any other way for them to have been earned, it seemed somewhat believable - in the absence of another answer. I have now been able to add everything up and get to roughly the same figure as them.
I also now feel confident that if you earn the points only (or almost only) from credit cards you're safe. Only a large windfall from banking will hurt you as long as you earn and burn regularly.
Caveat: If you earned 60,000 points over a few years from banking and then spent them all in one tax year, you would get hit with a 1099. Stay under a spending valuation of $600 from banking and you should be as fine as I thought we all were before this all happened.
I realize that my battle with them got a lot of people scared about getting the Citi credit cards. I was going on what I was told repeatedly and from multiple sources - but again, happily they appear to all have been wrong. Not that so many Citi reps distributing incorrect info is a great comfort, but let's focus on the road ahead - we can get Citi credit card bonuses all day long and not pay tax on those points
I have a happy ending to report. With great pains, a helpful Citigold rep conferencing in a helpful Thank You rep, I have finally gotten to the bottom of things after 1.5 months of constantly trying to sort it all out. Apparently at some point in early 2011, I was given bonus TY points as a gift from my banker. Those were missed by everyone until now.
The problem was that over and over, reps were explaining to me, in some cases adamantly, that this was the result of my credit card bonus points. Since I couldn't find any other way for them to have been earned, it seemed somewhat believable - in the absence of another answer. I have now been able to add everything up and get to roughly the same figure as them.
I also now feel confident that if you earn the points only (or almost only) from credit cards you're safe. Only a large windfall from banking will hurt you as long as you earn and burn regularly.
Caveat: If you earned 60,000 points over a few years from banking and then spent them all in one tax year, you would get hit with a 1099. Stay under a spending valuation of $600 from banking and you should be as fine as I thought we all were before this all happened.
I realize that my battle with them got a lot of people scared about getting the Citi credit cards. I was going on what I was told repeatedly and from multiple sources - but again, happily they appear to all have been wrong. Not that so many Citi reps distributing incorrect info is a great comfort, but let's focus on the road ahead - we can get Citi credit card bonuses all day long and not pay tax on those points
Mar 29, 2012, 9:11 pm
#641
FlyerTalk Evangelist
Join Date: Jul 2003
Location: Florida
Posts: 29,762
All,
I have a happy ending to report. With great pains, a helpful Citigold rep conferencing in a helpful Thank You rep, I have finally gotten to the bottom of things after 1.5 months of constantly trying to sort it all out. Apparently at some point in early 2011, I was given bonus TY points as a gift from my banker. Those were missed by everyone until now.
I have a happy ending to report. With great pains, a helpful Citigold rep conferencing in a helpful Thank You rep, I have finally gotten to the bottom of things after 1.5 months of constantly trying to sort it all out. Apparently at some point in early 2011, I was given bonus TY points as a gift from my banker. Those were missed by everyone until now.
And many thanks to you for posting this happy ending.
Question: are you totally unaware of the bonus given to you by your banker? How big is the bonus? I mean, if it is large enough to trigger a 1099, it would be in the neighborhood of tens of thousands - would an increase in your balance not raise your attention or curiosity of such "windfall"? The account summary of TYP has a long history that you can go far back many months with line details - where the points are coming from, i.e. the sponsor account numbers associated to those points... How could everyone miss it? All everyone needs to do is to add the banking side points together - not a hard task to do given the info available on TYP website.
The problem was that over and over, reps were explaining to me, in some cases adamantly, that this was the result of my credit card bonus points. Since I couldn't find any other way for them to have been earned, it seemed somewhat believable - in the absence of another answer. I have now been able to add everything up and get to roughly the same figure as them.
Isn't it not the case in your scenario?
Or Citi goes by the FIFO rule first, before applying the pro-rata rule? i.e. TYPs redeemed are based on the order of when they are earned - so if the TYPs earned from banking are earned earlier than the CC side, then they would make up the bulk of your redemption, hence almost all your redemption is taxable in this sense?
I realize that my battle with them got a lot of people scared about getting the Citi credit cards. I was going on what I was told repeatedly and from multiple sources - but again, happily they appear to all have been wrong. Not that so many Citi reps distributing incorrect info is a great comfort, but let's focus on the road ahead - we can get Citi credit card bonuses all day long and not pay tax on those points
On final words, I am sure we can all breathe a collective relief sigh - after all, it is a false alarm - not only Citi has not misposted anything to your account as you, and us being led to believe/speculate, but Citi is actually rather accurate in calculating the taxable portion of the bonuses after all, as we have seen people posted all along. @:-)
Last edited by Happy; Mar 29, 2012 at 9:18 pm
Mar 30, 2012, 4:31 am
#642
formerly known as daveland
Join Date: Oct 2003
Location: NY, NY, USA
Programs: Hyatt Globalist, Marriott LTP, Delta Platinum, Hilton Honors Diamond, Wyndham Diamond
Posts: 2,969
To sum up, Happy:
1) At the time, early last year, I knew about the bonus. But in real world time, that was an eternity ago and I forgot all about it. Although, the bonus on its own was 20k. What was most baffling yesterday was that the agent discovered a second 20K bonus from banking about a month later. So one in April and one in May. The one from April rang a bell; I have no idea where the second one came from but can only assume I got it somehow since it's in the history and for a slightly different amount.
2) One of the struggles in figuring out what points were used is that unless your balance was 0, you can't get a total of banking and credit card points earned vs redeemed. Important to note is that the system spends banking points before all others - because banking points expire and credit card points don't. So the system goes by what is expiring first. So in my case, those bonuses plus the standard 1,200 points a month earned in 2011 were all used before credit card points.
While you can look at earn history, it is the inability to match that up to resumptions that is the real issue with 1099s. Also, I could not get my history to go back online beyond one year ago. The only reason this was truly sorted was that I had emptied my balance in late 2010, so I knew anything burned in 2011 was, for the most part, earned in 2011. Interestingly, even the agent could not see all the way back - as she remarked that 2011 was my first big redemption ever. Not true, as I'd cashed out big time in the early fixed flight redemption days...
Finally, as for how my totals were over $600 on banking......... almost all my redemptions were at 1.3c (flights). So we computed 56,000 points and change from banking earned in 2011, getting close enough to the $741 (or at the very least, definitely over the $600 threshold) given that all banking points were burned first, that I was content it was accurate-enough to let it rest.
1) At the time, early last year, I knew about the bonus. But in real world time, that was an eternity ago and I forgot all about it. Although, the bonus on its own was 20k. What was most baffling yesterday was that the agent discovered a second 20K bonus from banking about a month later. So one in April and one in May. The one from April rang a bell; I have no idea where the second one came from but can only assume I got it somehow since it's in the history and for a slightly different amount.
2) One of the struggles in figuring out what points were used is that unless your balance was 0, you can't get a total of banking and credit card points earned vs redeemed. Important to note is that the system spends banking points before all others - because banking points expire and credit card points don't. So the system goes by what is expiring first. So in my case, those bonuses plus the standard 1,200 points a month earned in 2011 were all used before credit card points.
While you can look at earn history, it is the inability to match that up to resumptions that is the real issue with 1099s. Also, I could not get my history to go back online beyond one year ago. The only reason this was truly sorted was that I had emptied my balance in late 2010, so I knew anything burned in 2011 was, for the most part, earned in 2011. Interestingly, even the agent could not see all the way back - as she remarked that 2011 was my first big redemption ever. Not true, as I'd cashed out big time in the early fixed flight redemption days...
Finally, as for how my totals were over $600 on banking......... almost all my redemptions were at 1.3c (flights). So we computed 56,000 points and change from banking earned in 2011, getting close enough to the $741 (or at the very least, definitely over the $600 threshold) given that all banking points were burned first, that I was content it was accurate-enough to let it rest.
Last edited by MilesTalk; Mar 30, 2012 at 9:25 pm Reason: Fixed line to read because banking points expire and credit card points don't."
Mar 30, 2012, 12:17 pm
#643
Join Date: Mar 2002
Location: SF Bay area
Posts: 269
Other than one poster mentioned about he was being told the bonus points are taxable, we have not heard from anyone else that their bonus earning are taxable. I have TYP bonus earnings in 2010, 2011, do not receive any 1099's from Citi.
Please provide solid evidence other than here-say about your assertion on how TYPs are being treated for tax reporting purpose.
The only thing we all know for 100% certainty is, TYPs earned from banking products are taxable - that is not new, it has been this way from almost day one, like 4 years ago.
Which one you know based on first hand knowledge?
There is one post about HSBC revised its 1099's to reflect bonus earned, again, from opening bank account.
There is no report about points earned from CC has been treated as taxable, bonus or non bonus.
Your claim here demonstrates a total lack of knowledge of general accounting principles.
Citi cannot report a write-off on the FMV reported on 1099's UNLESS Citi actually INCURRED the same COST for those points. Nobody is stupid enough to think Citi actually incurred the same cost for the TYPs / Miles they awarded, isn't it? Then why would people be so stupid to claim that Citi purposely do the 1099's so it can write it off as expenses? At the maximum, Citi could only write off the ACTUAL cost incurred to acquire points/miles for distribution - that we all know it isn't the 0.025 per mile figure.
Please provide solid evidence other than here-say about your assertion on how TYPs are being treated for tax reporting purpose.
The only thing we all know for 100% certainty is, TYPs earned from banking products are taxable - that is not new, it has been this way from almost day one, like 4 years ago.
Which one you know based on first hand knowledge?
There is one post about HSBC revised its 1099's to reflect bonus earned, again, from opening bank account.
There is no report about points earned from CC has been treated as taxable, bonus or non bonus.
Your claim here demonstrates a total lack of knowledge of general accounting principles.
Citi cannot report a write-off on the FMV reported on 1099's UNLESS Citi actually INCURRED the same COST for those points. Nobody is stupid enough to think Citi actually incurred the same cost for the TYPs / Miles they awarded, isn't it? Then why would people be so stupid to claim that Citi purposely do the 1099's so it can write it off as expenses?
At the maximum, Citi could only write off the ACTUAL cost incurred to acquire points/miles for distribution - that we all know it isn't the 0.025 per mile figure.Just google "Donating Appreciated Stock", and you will know how you can write off more than you paid for.
Citi can claim that how much they paid for the points/miles are totally irrelevant to the FMV (and write-off), because they gave them away for free, instead of sold them.
Mar 30, 2012, 12:30 pm
#644
Formerly known as CollegeFlyer
Join Date: Jan 2004
Location: JRA
Programs: UA 1K MM, AA PLT, Hyatt Diamond, Marriott Gold, Hertz 5*
Posts: 6,716
Giving something to a customer for business development is totally from making a charitable donation to a 501(c)(3) nonprofit. A lawyer who failed to recognize the difference and advised Citi to do what you outlined above would probably be liable for malpractice.
Last edited by EsquireFlyer; Mar 30, 2012 at 12:35 pm
Mar 30, 2012, 8:18 pm
#645
Join Date: Mar 2002
Location: SF Bay area
Posts: 269
And you grossly underestimated the IRS's ability to enforce the law. Donating appreciated stock to charity is a special case, and the principle is not generally applicable to other situations. (And unlike the airlines, when the IRS says "one-time exception," they really mean one-time exception.)
Citi can claim that, if they want to pay back taxes, interest, and penalties.
Giving something to a customer for business development is totally from making a charitable donation to a 501(c)(3) nonprofit. A lawyer who failed to recognize the difference and advised Citi to do what you outlined above would probably be liable for malpractice.
Citi can claim that, if they want to pay back taxes, interest, and penalties.
Giving something to a customer for business development is totally from making a charitable donation to a 501(c)(3) nonprofit. A lawyer who failed to recognize the difference and advised Citi to do what you outlined above would probably be liable for malpractice.
Again, something you are not aware of doesn't mean non-exist.
Enough is enough for this off-topic "branch".