February 8, 2012
The Revenue Service isn’t changing the tax rules on frequent-flier miles, even though Citibank is now issuing 1099s to customers who received miles for opening accounts there. The bank says that if the miles are worth $600 or more, it will issue a 1099-MISC because the miles are given as a premium and are taxed as income. In 2002, IRS threw in the towel on taxing the value of free personal flights received for miles earned on company-paid travel. Since then, IRS has not asserted that taxpayers owe tax on mileage earned through credit card purchases, either. The Service now says the 2002 ruling doesn’t exempt miles received as a premium from a bank. But the agency reiterates that miles earned on employer-paid travel and on purchases that are made with credit cards are not taxed as income.
Source: Kiplinger Tax Letter, February 6, 2012
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