Are Banks sending out 1099s for Airline Miles awarded?

I just posted an article on Airline Miles and Income taxes. One of my readers, Tom, shared in a comment the fact that he had received a 1099 for the Miles he had received from Citibank for opening a bank account! This is surprising and disturbing. He also led me to an article on LA Times which the reporter, David Lazarus, wrote after hearing of this from Tom. He confirms that Citibank has sent out 1099s. They are valuing the miles at 2.5¢ per mile! I would like to point out that while I received miles from Citibank last year for opening a credit card with them, I have not received a 1099 (yet).

This can end up being a big hit! If someone collected 100,000 miles from the recent CapitalOne card promo (I plead the 5th), they may suddenly be on the hook for $700 in taxes! (100,000 * $0.025 * 28% tax rate = $700).

Is this a one off? Is Citibank doing this only for certain types of accounts? Is Citibank the only bank doing the? Has anyone else received 1099s?

If anyone has received a 1099, please leave a comment below. If anyone has more information, please share. Let’s see if we can get to the bottom of this. I will post an update once I have more information.

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Pingbacks

  1. […] Getting a 1099 for Airline miles has been beaten to death across all Airline Blogs and forums and several news outlets, earlier this year, including this blog. Newsweek’s Christopher Elliott just woke up from his deep slumber yesterday to stumble upon this topic on a what must be a slow news day. Not only is he writing so very late, he got it all wrong and is giving totally wrong advise based on his clueless interpretation of the facts. […]

Comments

  1. Matt, the ‘standard’ value airline attribute to miles is 2.5 cents per miles. But this is ‘attributed’ value, not cash value.

  2. This is a pretty straightforward situation.

    Things given related to deposit accounts (be it interest, a toaster or miles) are all forms of interest income. For example, when HSBC was giving iPods for new accounts, they’d put the value of the iPod on your 1099 at the end of the year. Why one leading Texas bank that awards miles doesn’t do this, I don’t know…they should. (Let’s not raise the issue with them, please.)

    Points given related to credit cards, on the other hand, are “rebates,” and are not taxable income. The best parallel would be to look to cash-back credit cards, they don’t hit you with a 1099 on your rebate.

    So, miles on your Citi checking accounts will attract a 1099, while your Citi AAdvantage card won’t.

    This actually makes a lot of sense.

  3. Citi sending 1099’s for miles awarded on bank accounts is nothing new. They have been doing this for many years. They do not send 1099’s for miles earned from credit cards.

  4. Hi,

    Just got my Citibank 1099 in the mail a few days ago. 750$ was the value they placed on the 25,000 AA miles I got for opening a checking account…HELP!

  5. Ouch is right! It seems to be pretty cear cut – Miles from Bank accounts result in 1099s; Miles from Credit Cards do not.

  6. Received a 1099 from CitiBank last year for miles received in 2010
    I’m expecting to receive one this year as well as I ahve collected another 20k mile in 2011

  7. Question:
    Has anyone argued Successfully with the IRS on the inflated value of the miles reported by Citibank ???

  8. Christo, Thanks for sharing. Is this for a bank account? I am assuming you do not get a 1099 for miles earned on a credit card.

  9. Would it apply to TD Ameritrade brokerage, such as the recent United miles / SPG point bonus for opening an account?

  10. yep. i received one for $625 Other Income. I have researched it and found that ONLY Citibank does this. And its deductible to them. What a way to lower your income tax. I will be closing my account with them and NEVER getting another one. I think its sneaky of them – to at least not notify us that this could happen. I may never get to use the miles, but will have to pay tax on the amount anyway.

  11. I’m interested in how fast this has become national news. I know of Netflix DVD/streaming charge changes, Bank of America debit card fees, Verizon billing practices, SOPA, and now taxability of CitiBank banking premiums of airline miles. I hope there are more … all of these are recent.

    I connect this to Occupy, ordinary people using internet networking to resist, learning that things can be changed.

  12. This is yet another example of fraudulent marketing. When I just signed up for a card, I saw no mention of an impending 1099.

    I am going to cancel the card and shove it back to Citibank.

  13. Tesci, please read the comments in the post. 1099s are only issued for Citibank checking accounts that earned miles. You will not get a 1099 for your credit card miles.

  14. Yes – got a 1099 from Citi for $1,000 for a 40K mile checking account bonus.
    My husband opened similar account and got 40K miles but never got 1099 – go figure.
    We are closing all the accouts with City!!!!

  15. Got a call from HSBC that they are going to send out 1099 on the 100,000 points that I received when I open a high premium account in 2011. It seems an afterthought as I have called in January for the 1099 and they respond as the account earns practically nothing ($0.9) that they will not issue any 1099. Then, the call and the 1099 won’t send out until 3/30/2012. I wonder whether they have sent 1099 for people who got a MacBook instead.

  16. I did also — $750 can we start a class action suit? Citibank never told me I would get a tax bill of $750 for this. Shame on them.

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