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.