[Consolidated] 1099s for miles & cash rewards from all banks
Jan 20, 2012, 12:14 pm
#106
Join Date: Mar 2011
Posts: 349
I have ~115,000 points on Chase Ultimate Rewards which I can put directly into my checking account valued at $1,150. Pretty sweet. My concern is using it this way vs putting into miles (115k United miles) will get me a 1099 and not be worth it. Anyone have experience with this? Thanks!
EDIT: ULTIMATE REWARDS, not Membership Rewards
EDIT: ULTIMATE REWARDS, not Membership Rewards
Jan 20, 2012, 12:35 pm
#107
Join Date: Aug 2011
Location: SLC
Posts: 392
I have ~115,000 points on Chase Ultimate Rewards which I can put directly into my checking account valued at $1,150. Pretty sweet. My concern is using it this way vs putting into miles (115k United miles) will get me a 1099 and not be worth it. Anyone have experience with this? Thanks!
EDIT: ULTIMATE REWARDS, not Membership Rewards
EDIT: ULTIMATE REWARDS, not Membership Rewards
I assume you have the Sapphire Preferred card, which allows redemption through the UR travel portal at a 25% discount.
Better still, if you fly on any of the airline partners and redeem points for business or first class, you can get several times the value of a deposit to your checking account.
Jan 20, 2012, 12:40 pm
#108
FlyerTalk Evangelist
Join Date: May 2008
Location: CHA, MAN;
Programs: Delta DM 1 MM; Hz PC
Posts: 11,169
I have ~115,000 points on Chase Ultimate Rewards which I can put directly into my checking account valued at $1,150. Pretty sweet. My concern is using it this way vs putting into miles (115k United miles) will get me a 1099 and not be worth it. Anyone have experience with this? Thanks!
EDIT: ULTIMATE REWARDS, not Membership Rewards
EDIT: ULTIMATE REWARDS, not Membership Rewards
Last edited by GRALISTAIR; Jan 20, 2012 at 4:59 pm
Jan 20, 2012, 2:24 pm
#109
Join Date: Dec 2008
Posts: 563
The points associated with a credit card are considered a rebate, therefore, there is no tax consequence.
On another note though. My wife opened a checking account with Citibank for 25,000 miles and just received a 1099 for $625. That's total BS! I will never deal with Citi again except to get miles from a credit card, then cancel the account.
On another note though. My wife opened a checking account with Citibank for 25,000 miles and just received a 1099 for $625. That's total BS! I will never deal with Citi again except to get miles from a credit card, then cancel the account.
Jan 20, 2012, 2:54 pm
#111
FlyerTalk Evangelist
Join Date: Aug 2002
Location: Intermountain West
Programs: Too many to list
Posts: 12,082
The points associated with a credit card are considered a rebate, therefore, there is no tax consequence.
On another note though. My wife opened a checking account with Citibank for 25,000 miles and just received a 1099 for $625. That's total BS! I will never deal with Citi again except to get miles from a credit card, then cancel the account.
On another note though. My wife opened a checking account with Citibank for 25,000 miles and just received a 1099 for $625. That's total BS! I will never deal with Citi again except to get miles from a credit card, then cancel the account.
Jan 20, 2012, 4:17 pm
#112
Join Date: Jul 2004
Programs: CO, UA, AA, WN, DL Gold
Posts: 2,981
Citi checking
It's a well know fact on FT that CITI will send you a 1099 for checking account bonus cash. It's basically "ordinary income" and is taxable. I'll bet Chase will also send 1099's for checking acct. bonuses. But NO ONE sends a 1099 for miles or hotel bonus points, no matter how you use those miles or points. At least, I've never heard of this happening.
Jan 20, 2012, 4:23 pm
#113
Original Member
Join Date: May 1998
Location: Tampa, FL
Programs: AAMM & PLT; UA Gold, DL Silver, Marriott LT Titanium Elite, Hilton Diamond, Hertz #1 Gold Club
Posts: 1,591
Jan 20, 2012, 7:42 pm
#114
Join Date: Aug 2010
Location: PHX
Posts: 380
Received a 1099 today for $625 for the 30K bonus for opening a citibank bank account. I have to say, probably not worth doing the bank account thing, particularly if you are in one of the higher brackets and aren't a Republican presidential candidate paying taxes in the teens. Just sayin'...
Just got a $1000 1099 from Citi. Ignored the warnings, shame on me.
Jan 20, 2012, 8:08 pm
#115
Join Date: Jun 2009
Location: Oakland, CA
Posts: 1,231
The IRS probably isn't the way to go here. The phone rep. was correct in that we must deal with Citi. If that doesn't work the other thread on this subject has links as to how to present the "correct" amount on the return.
For a 1099-INT, it might not be so bad. Presumably, the full amount of interest would be reported on Schedule B using "Citi" and the next line on Schedule B would also be listed as "Citi" with a negative amount for the portion of "interest" that does not represent the value received. At least this is how it is done when someone receives a 1099-INT for the full amount of interest in a joint account and the other account holder reports his/her portion. The negative amount is pretty standard and hopefully won't draw too much attention, since the gross amount clearly appears on Schedule B and a lot of filers have "subtractions" on this schedule. Maybe this won't draw a manual look by the IRS, but no one knows for sure.
The 1099-MISC is actually more worrisome. The gross amount on the Form 1099-MISC needs to show up, so presumably a schedule needs to be attached reflecting the gross amount and the subtraction needed to arrive at the correct net income. Since this is a supporting schedule rather than a specific form, the IRS matching system will flag it and someone will have to look at the supporting schedule. Probably no big deal since everything is reflected, but still undesirable.
For a 1099-INT, it might not be so bad. Presumably, the full amount of interest would be reported on Schedule B using "Citi" and the next line on Schedule B would also be listed as "Citi" with a negative amount for the portion of "interest" that does not represent the value received. At least this is how it is done when someone receives a 1099-INT for the full amount of interest in a joint account and the other account holder reports his/her portion. The negative amount is pretty standard and hopefully won't draw too much attention, since the gross amount clearly appears on Schedule B and a lot of filers have "subtractions" on this schedule. Maybe this won't draw a manual look by the IRS, but no one knows for sure.
The 1099-MISC is actually more worrisome. The gross amount on the Form 1099-MISC needs to show up, so presumably a schedule needs to be attached reflecting the gross amount and the subtraction needed to arrive at the correct net income. Since this is a supporting schedule rather than a specific form, the IRS matching system will flag it and someone will have to look at the supporting schedule. Probably no big deal since everything is reflected, but still undesirable.
Jan 21, 2012, 1:22 am
#117
Join Date: May 2011
Posts: 8
If the 1099-misc amount issued in box 7, nonemployment compensation. The amount will be added to your earned income And the amount will also be taxed the self-employment tax.
so lets say, your income was 16,000 and you received a 1099-misc with the amount of $1000 in box 7.
1st) your earned income for 2011 will be $17000 before income tax.
2nd) your $1000 from the 1099-misc will also have to pay the self-employment tax, since it will need to be attached to a Sch C.
and how do you figure that out? well you take 92.35% of 1000 and you get $924
then multiply the $924 by 13.3% and you get $123, the total self employment tax. which will be added to your income tax.
Finally, you multiply $123 by 57.51% and you get $71, the deduction part of the self-employee tax that you will subtract from your $17000 earned income originally, making your AGI 16,929 before your income tax.
Basically, if you didn't have the 1099-misc with an income of $16000 you would have to pay $1,109 in taxes
with the 1099-misc, $1,367. The amount will vary based on your income bracket of course, but it's safe to say $1000 issued as a 1099-misc will cause you about $200+ in additional taxes . This sample is single, 16k income.
so lets say, your income was 16,000 and you received a 1099-misc with the amount of $1000 in box 7.
1st) your earned income for 2011 will be $17000 before income tax.
2nd) your $1000 from the 1099-misc will also have to pay the self-employment tax, since it will need to be attached to a Sch C.
and how do you figure that out? well you take 92.35% of 1000 and you get $924
then multiply the $924 by 13.3% and you get $123, the total self employment tax. which will be added to your income tax.
Finally, you multiply $123 by 57.51% and you get $71, the deduction part of the self-employee tax that you will subtract from your $17000 earned income originally, making your AGI 16,929 before your income tax.
Basically, if you didn't have the 1099-misc with an income of $16000 you would have to pay $1,109 in taxes
with the 1099-misc, $1,367. The amount will vary based on your income bracket of course, but it's safe to say $1000 issued as a 1099-misc will cause you about $200+ in additional taxes . This sample is single, 16k income.
Last edited by Thinkdiesel; Jan 21, 2012 at 1:38 am
Jan 21, 2012, 8:39 am
#118
Join Date: Oct 2011
Location: North Carolina
Posts: 613
If the 1099-misc amount issued in box 7, nonemployment compensation. The amount will be added to your earned income And the amount will also be taxed the self-employment tax.
so lets say, your income was 16,000 and you received a 1099-misc with the amount of $1000 in box 7.
1st) your earned income for 2011 will be $17000 before income tax.
2nd) your $1000 from the 1099-misc will also have to pay the self-employment tax, since it will need to be attached to a Sch C.
and how do you figure that out? well you take 92.35% of 1000 and you get $924
then multiply the $924 by 13.3% and you get $123, the total self employment tax. which will be added to your income tax.
Finally, you multiply $123 by 57.51% and you get $71, the deduction part of the self-employee tax that you will subtract from your $17000 earned income originally, making your AGI 16,929 before your income tax.
Basically, if you didn't have the 1099-misc with an income of $16000 you would have to pay $1,109 in taxes
with the 1099-misc, $1,367. The amount will vary based on your income bracket of course, but it's safe to say $1000 issued as a 1099-misc will cause you about $200+ in additional taxes . This sample is single, 16k income.
so lets say, your income was 16,000 and you received a 1099-misc with the amount of $1000 in box 7.
1st) your earned income for 2011 will be $17000 before income tax.
2nd) your $1000 from the 1099-misc will also have to pay the self-employment tax, since it will need to be attached to a Sch C.
and how do you figure that out? well you take 92.35% of 1000 and you get $924
then multiply the $924 by 13.3% and you get $123, the total self employment tax. which will be added to your income tax.
Finally, you multiply $123 by 57.51% and you get $71, the deduction part of the self-employee tax that you will subtract from your $17000 earned income originally, making your AGI 16,929 before your income tax.
Basically, if you didn't have the 1099-misc with an income of $16000 you would have to pay $1,109 in taxes
with the 1099-misc, $1,367. The amount will vary based on your income bracket of course, but it's safe to say $1000 issued as a 1099-misc will cause you about $200+ in additional taxes . This sample is single, 16k income.
That is the way my tax program handles it. It actually prints out "NON-EMPLOYEE COMPENSATION FROM FORM 1099-MISC" on line 21.
Last edited by JATR4; Jan 21, 2012 at 8:40 am Reason: Added content
Jan 21, 2012, 10:15 am
#119
Join Date: Apr 2007
Posts: 562
Follow up on post #93. I was kinda correct about 25,000 miles but it actually was a $600 minimum which I read in a letter Citi had sent me - I dug it up - here is the relevant excerpt...
"In response to your inquiry, the fair market value of 23,500 AAdvantage miles is $587.50. Citibank is required by federal tax law to send to customers and file with IRS Form 1099-MISC when the individual receives miscellaneous income of $600.00 or greater in a tax year. Under IRS rules, the payment of miles associated with this particular promotion is considered to be miscellaneous income and reportable on Form 1099-MISC."
This is an important clarification - Does this mean that awards below 24,000 miles (valued at $600) will not attract a 1099? This seems to conflict with those who have posted above that they received 1099s for an award of 10,000 miles (Post #77 - only valued at $250), and 20,000 miles (Post #92). Could this be because in addition to the 10,000/20,000 miles, these individuals received at least 14,000/4,000 miles from other accounts or from other Citibank promotions?
Or is the $600 minimum not really enforced and does Citi send out even for smaller amounts?
"In response to your inquiry, the fair market value of 23,500 AAdvantage miles is $587.50. Citibank is required by federal tax law to send to customers and file with IRS Form 1099-MISC when the individual receives miscellaneous income of $600.00 or greater in a tax year. Under IRS rules, the payment of miles associated with this particular promotion is considered to be miscellaneous income and reportable on Form 1099-MISC."
This is an important clarification - Does this mean that awards below 24,000 miles (valued at $600) will not attract a 1099? This seems to conflict with those who have posted above that they received 1099s for an award of 10,000 miles (Post #77 - only valued at $250), and 20,000 miles (Post #92). Could this be because in addition to the 10,000/20,000 miles, these individuals received at least 14,000/4,000 miles from other accounts or from other Citibank promotions?
Or is the $600 minimum not really enforced and does Citi send out even for smaller amounts?
Jan 21, 2012, 12:30 pm
#120
Original Member
Join Date: May 1998
Posts: 1,139
Apparently you don't buy many taxable bonds with accrued interest at the purchase date. Negative on Schedule B are quite common for investors with accrued interest purchased.
The current discussion does not involve Schedule B, though, since Citi did not offer bonuses for savings accounts and the 2011 1099s aren't 1099-INTs.
The 1099-MISC is more difficult to deal with when trying to use negative amounts. If it is entered on the "Other Income" line, a person would have to enter the gross amount and enter another line with a description and a negative number. An earlier post describes the technique, but I'm not sure it is in this thread, as there were once three threads on this subject and they were never merged.
It is ultimately a valuation issue. I personally don't think the miles are worth 2.5 cents per mile, but I don't know what the value is. The negative amount would be used to reduce the taxable amount to what the taxpayer believes to be the correct valuation.
Last year (2010 tax year) Citi did amend the 1099 to reflect $0, but I think I was fortunate to have found the right customer service representative, and I was very persistent.