Citibank 1099

[HelpMe]

It seems many here are worried about a problem that does not exist. The IRS has always treated sing up bonus on CC’s as a rebate and not taxable. Gift/awards for opening a checking/savings account are taxable. Nothing has change. Can they change this in the future, of course? If you have a beef with the 2.5 cpm Citi is valuing the miles at file a dispute and stop crying about it.

If you can’t do the time don’t do the crime!

[Dan]

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!

It's intentional, maybe someone will pay tax on their credit card signups...

[aussiebochur]

It's intentional, maybe someone will pay tax on their credit card signups...

First they should work on people paying tax on their income

[Dan]

It seems many here are worried about a problem that does not exist. The IRS has always treated sing up bonus on CC’s as a rebate and not taxable. Gift/awards for opening a checking/savings account are taxable. Nothing has change. Can they change this in the future, of course? If you have a beef with the 2.5 cpm Citi is valuing the miles at file a dispute and stop crying about it.

If you can’t do the time don’t do the crime!

Exactly.
But personally I prefer signup bonuses than singups, though my wife does watch Glee on occasion.

[HelpMe]

But personally I prefer signup bonuses than singups, though my wife does watch Glee on occasion.

I can't blame that one on spell checker. 

[Barrons]

Here is an article from Friday's WSJ. Might help clear up some of the confusion.

http://online.wsj.com/article/SB10001424052970204662204577199323818720712.html

[APoshiterYid]

There are least six categories of frequent-flier miles, and several different ways of taxing them.

[Deal Guy]

I know that there has been much talk here regarding Citibank sending out 1099's for opening a Citi AA bank account, and for the outrageous fact that they are valueing the miles at 2.5 cents each, meaning that those of that got 25,000 miles, got hit with a 1099 for $625!

What bothers me the most is the fact that I just noticed that instead on getting a "1099-Int", which means it's unearned income, I recieved a "1099-Misc" which 'I believe' means that its regular earned income, and therefore instead of it just adding a liability to my Federal and State taxes (which i may or may not get back), I am now fully responsible to pay all Social Security taxes, Medicare, Fica, ect..,which you can never get back, even if you have a small income.

As far as I know, when you open a checking account in any bank, and receive a gift of $25 or $250 for opening it, at the end of the year you get a 1099-Int for any interest that you may have earned that year plus you get a different 1099-Int for your gift, (or its on the same 1099-Int), but you definitely don't get a 1099'Misc".

So how could citibank have sent us a 1099-Misc for these 25,000 AA miles? It's not work that I did or was self employed?

Do you think they sent me and my wife the wrong 1099 in error? What can I do?

[Dan]

PUTPAC and ask why it isn't 1099-INT

[Deal Guy]

PUTPAC and ask why it isn't 1099-INT

I did that, didn't get a response. Thats why im asking here if others got a 1099 Int or a 1099 Misc?

[Dan]

I did that, didn't get a response. Thats why im asking here if others got a 1099 Int or a 1099 Misc?

So PUTPAC again until you do.
Yagaiti v'lo matzasi, al taa'min.

[Deal Guy]

So PUTPAC again until you do.
Yagaiti v'lo matzasi, al taa'min.

Am I correct that for a 1099 Int there is no Social Security Liability, while for a 1099 Misc you do pay, or am I wrong?

[Dan]

Am I correct that for a 1099 Int there is no Social Security Liability, while for a 1099 Misc you do pay, or am I wrong?

Makes sense to me, but I'm no CPA.

[MarkS]

They are not necessarily wrong. A 1099-misc is issued for many different types of things - including prizes and awards.

The signup bonus isn't really 'interest', more like a prize or award.

That being said, you could relax. Because that a 1099-misc could be issued for many differen types of 'income', it isn't necessarily considered earned income. If it is indeed self employment income (and entered in box 7) you will pay self employment tax and it's considered earned income.
In your case, it's a prize and is probably in Other Income (box 3) which is considered passive income and NOT subject to Self Employment tax.

I am not 100% positive though so get a second opinion before taking my word for it....

[Deal Guy]

They are not necessarily wrong. A 1099-misc is issued for many different types of things - including prizes and awards.

The signup bonus isn't really 'interest', more like a prize or award.

That being said, you could relax. Because that a 1099-misc could be issued for many differen types of 'income', it isn't necessarily considered earned income. If it is indeed self employment income (and entered in box 7) you will pay self employment tax and it's considered earned income.
In your case, it's a prize and is probably in Other Income (box 3) which is considered passive income and NOT subject to Self Employment tax.

I am not 100% positive though so get a second opinion before taking my word for it....

You mean it will go on line 21, as 'other income'? The tax programs know that anything on that line doesn't need to pay Fica?

[MarkS]

You mean it will go on line 21, as 'other income'? The tax programs know that anything on that line doesn't need to pay Fica?

No, it doesn't go on Line 21. Line 21 would only be for something that doesn't have a 1099 or W-2 and is as of yet unknown to the IRS. (Ex. a prize or award that didn't send you a 1099).
A typical 1099-misc would go on a schedule C but I'm assuming this won't be there.
 Not sure where it does go. Try running it through Turbo Tax and see if it asks you what it's from and how they treat it.

Quick story my professor told me about line 21....
He was doing his old aunt's return. She lived in a beach house in Long Island. The show "*** in the City" was looking for a beach house to film a segment in and they offered her $10,000 for use of her house for the day. When it came to doing her return, he put in on Line 21 and added a description of where it came from. The computer truncated his description so it came out reading   $10,000 - ***!!!!

[Dan]

[Deal Guy]

No, it doesn't go on Line 21. Line 21 would only be for something that doesn't have a 1099 or W-2 and is as of yet unknown to the IRS. (Ex. a prize or award that didn't send you a 1099).
A typical 1099-misc would go on a schedule C but I'm assuming this won't be there.
 Not sure where it does go. Try running it through Turbo Tax and see if it asks you what it's from and how they treat it.

Quick story my professor told me about line 21....
He was doing his old aunt return. She lived in a beach house in Long Island. The show *** in the City was looking for a beach house to film a segment in and they offered her $10,000 for use of her house for the day. When it came to doing her return, he put in on Line 21 and added a description of where it came from. The computer truncated his description to it came out reading   $10,000 - ***!!!!

lol
Not really familiar with Schedule C, but regardless, doesn't the bottom line number from Schedule c need to end back up on one of the lines on the 1040?

[Deal Guy]

No, it doesn't go on Line 21. Line 21 would only be for something that doesn't have a 1099 or W-2 and is as of yet unknown to the IRS. (Ex. a prize or award that didn't send you a 1099).
A typical 1099-misc would go on a schedule C but I'm assuming this won't be there.
 Not sure where it does go. Try running it through Turbo Tax and see if it asks you what it's from and how they treat it.

You mean that it must be somewhere between line 8 and line 20, just you're not sure where?

[Deal Guy]

It does need to end up somewhere on the 1040- not sure where.

I think all income goes between line 7 and 21, so it needs to go there i think.