Citibank 1099

[Dan]

Couldn't "opening a financial account " also include opening a CC?

No, he clearly says that he's talking about bank accounts, not ccs.

[AJK]

Couldn't "opening a financial account " also include opening a CC?

You're not the only one to wonder:

The particularly interesting bit is the use of the term "financial account." Not only would this apply to bank accounts, but it could also be reasonably interpreted to apply to credit card and investment accounts as well. After all, those are financial accounts and the points are provided as a premium for opening the account.

[Dan]

I don't get it.  The guy says one sentence later exactly what he meant and why it doesn't apply to ccs.

[aussiebochur]

I don't get it.  The guy says one sentence later exactly what he meant and why it doesn't apply to ccs.

He says "using" a CC. Not signup bonus.

[AJK]

I don't get it.  The guy says one sentence later exactly what he meant and why it doesn't apply to ccs.

Perhaps, regular CC spending ≠ initial CC bonus...

[Dan]

Credit cards spending and bonuses are all purchase rebates.  Note how every credit card out there has some kind of spend requirement to get the bonus.
Very different animal than a check account bonus, that has always traditionally been taxed.

[aussiebochur]

 

Credit cards spending and bonuses are all purchase rebates.  Note how every credit card out there has some kind of spend requirement to get the bonus.
Very different animal than a check account bonus, that has always traditionally been taxed.

I find it amazing that the IRS can't say it any clearer.

[AJK]

The concern is that there is ostensibly a difference between spending your first $1 and getting, say, $1000 in "rebate" and spending your second $1 and getting, say, a $0.02 rebate.

There's definitely enough room in what the IRS said to swallow the former scenario in its response.

[Dan]

I'm not even remotely worried, but if you'd like to worry along with Seth it's a free country.

[AJK]

Not worried, just point out that the language can be open to future, different interpretations.

[azhoopsfan]

The concern is that there is ostensibly a difference between spending your first $1 and getting, say, $1000 in "rebate" and spending your second $1 and getting, say, a $0.02 rebate.

Eldridge said that in those cases, miles wouldn't be taxable because they're more like a rebate.[/b]

"A common analogy," she said, "is buying a $500 television at a retail store and receiving a $50 manufacturer's rebate. It's not income, just a deemed reduction of the cost of the television."

Since gross income under the tax code includes assessions to wealth, if you were to receive $1,000 for buying a $500 TV, it wouldn't just be a rebate (or a reduction in the purchase price) you'd have an accession to wealth of $500 ($500 spent, $1,000 received).  Similarly, spending a $1 and getting $1,000 may be viewed as a reduction in the purchase price of $1 and $999 in gain. 

[azhoopsfan]

Since gross income under the tax code includes assessions to wealth, if you were to receive $1,000 for buying a $500 TV, it wouldn't just be a rebate (or a reduction in the purchase price) you'd have an accession to wealth of $500 ($500 spent, $1,000 received).  Similarly, spending a $1 and getting $1,000 may be viewed as a reduction in the purchase price of $1 and $999 in gain. 

I'm not saying this is definitely the case, but if the IRS wanted to start taxing it, they'd have a reasonable basis to do so.

[yitzf]

See what the IRS says about it:

http://consumerist.com/2012/01/citi-says-those-free-rewards-miles-you-received-are-taxable.html

to quote from that article:
a 2002 IRS policy brief states that "the IRS will not assert that any taxpayer has understated his federal tax liability by reason of the receipt or personal use of frequent-flier miles or other in-kind promotional benefits attributable to the taxpayer's business or official travel."
And when Lazarus contacted the IRS for clarification, he was told that the policy brief "still stands."

so is our whole conversation theoretical or for those who want to go lifnim mishuras hadin?

[azhoopsfan]

Times have changed since 2002, and miles / points are a bigger business now.  The fact that UR points, MR points, TY points and Cap One points can be converted to cash easily could result in a change to the IRS policy. 

The IRS policy is not set in stone and it can change any time. 

[yitzf]

Times have changed since 2002, and miles / points are a bigger business now.  The fact that UR points, MR points, TY points and Cap One points can be converted to cash easily could result in a change to the IRS policy. 

The IRS policy is not set in stone and it can change any time.

true, but "when Lazarus contacted the IRS for clarification, he was told that the policy brief "still stands." that was this year.
so until we hear that it was changed we can assume that the IRS is still standing by their written policy brief

[azhoopsfan]

so until we hear that it was changed we can assume that the IRS is still standing by their written policy brief

Agree.

[AJK]

true, but "when Lazarus contacted the IRS for clarification, he was told that the policy brief "still stands." that was this year.
so until we hear that it was changed we can assume that the IRS is still standing by their written policy brief

First of all, according to the language quoted by you, the IRS will not not collect tax on miles accrued from opening checking accounts, which is patently false.

Second, the quoted language says "the IRS will not assert that any taxpayer has understated his federal tax liability . . . attributable to the taxpayer's business or official travel". How does that help someone who opens a personal credit card?

Last, the entire conversation (at least the last page or so) has revolved around merely stating

that the language can be open to future, different interpretations.

[yitzf]

First of all, according to the language quoted by you, the IRS will not not collect tax on miles accrued from opening checking accounts, which is patently false.

Second, the quoted language says "the IRS will not assert that any taxpayer has understated his federal tax liability . . . attributable to the taxpayer's business or official travel". How does that help someone who opens a personal credit card

the point of that policy statement is that even though he's using them for personal use, it's not personal income, now there's another question, what he got them for, and regarding that the policy states, if someone gave you a gift of miles then it could be taxable but if you received it during the normal course of business or flying then they would not collect on that.

[azhoopsfan]

the point of that policy statement is that even though he's using them for personal use, it's not personal income, now there's another question, what he got them for, and regarding that the policy states, if someone gave you a gift of miles then it could be taxable but if you received it during the normal course of business or flying then they would not collect on that.

If you win a TV as an award it's taxable even if its for personal use. 

Gifts, however, are never taxable to the recipient (unless its from an employer, in which case it's not classifed as a gift but rather compensation).  They could be taxable to the donor if the donor used up his lifetime exclusion on gifts (currently $5M) and the current gift exceeded the annual gift exclusion ($13,000). 

[AsherO]

I find it amazing that the IRS can't say it any clearer.

I find it amazing they wrote a semi-coherent response and haven't managed to further obfuscate it... This country's tax code is outta control!