Thursday, March 1, 2012

Citibank Issues Forms 1099 for Frequent Flyer Miles, Surprising Customers and IRS

"Apparently, the banking industry doesn't have enough bad press these days. They're going to new heights to tick off customers… quite literally.

Citibank, part of CitigroupAmerica's #3 bank holding company, launched a campaign offering frequent flyer miles for opening new accounts. Sounds great, right? Only there was a hitch: Citibank announced that it would issue a form 1099-MISC for those customers who receive frequent flyer miles for opening accounts.

Generally, frequent flyer miles and other promotional credits used as a reward are not considered income and are not taxable.

Citibank, however, has a different – and aggressive – interpretation. Citibank contends frequent flyer miles given as a reward for opening an account are taxable income, as would cash or other rewards, and must be officially reported to the taxing authorities. That's the rationale for issuing a form 1099.

The bank has a similar strategy for cash awards. Here's what the small print says:"


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