Earlier this year, Citibank surprised a number of it’s credit card customers, and not in a good way. The customers had opened new accounts with Citibank, and we rewarded with frequent flyer miles as a thank you. Citibank then issued Forms 1099-MISC to the recipients of the miles, making the assumption the value of the miles was taxable to the new account holders.
Since then Congress and the public have all gotten involved in trying to get the issue sorted out. Are the miles really taxable income – the same as getting cash to open a new account? The closest thing we have to guidance is a 10-year old IRS pronouncement that doesn’t actually answer that question, but instead just states the IRS will turn a blind eye to the whole topic.
How this plays out will be interesting. When, and if, a resolution is reached, we’ll bring it to you.
