Mortgage Underwriter

[HP58]

Why not report it on your tax return and pay taxes on it?

Why not?!

[george]

Not arguing...just asking.  Would you pay taxes on an award ticket.  If no, what is the difference?

I don't understand what you mean. Pay taxes on award ticket? Income tax applies to income. There's no income when you book an award ticket, there is income when you sell miles.

[george]

Why not?!

I was replying to the concern that selling miles can lead to problems with the IRS. If someone wants to not be concerned, all they need to do is report the income and pay taxes on it, if applicable.

[metziah]

I asked my accountant last year if I can report money that I made selling miles and he said I can't.

[MarkS]

I asked my accountant last year if I can report money that I made selling miles and he said I can't.

Can't, or shouldn't?
The only reason I would imagine he would say you shouldn't (and possibly the reason that you wanted to count it) was if you were trying to increase your income to get the Earned Income Credit where you wanted it. In that case selling miles wouldn't count as income for the EIC unless it was a business, not just a small thing that you do here and there.

Other than that I don't see why he would say you 'can't' report it.
Now figuring out your basis to determine the amount of income is a whole different animal...

[GAJ2303]

Please confirm with your personal tax professional. Please note the below link, I didn't see anything more up to date.

http://www.irs.gov/pub/irs-drop/a-02-18.pdf

If you encounter a tax issue from the sale of the miles, remember to offset the income with any associated expenses (bluebird fees, if any - credit card fees, mileage to CVS, allocated cost of internet service, computer, etc....)

[MarkS]

Please confirm with your personal tax professional. Please note the below link, I didn't see anything more up to date.

http://www.irs.gov/pub/irs-drop/a-02-18.pdf

If you encounter a tax issue from the sale of the miles, remember to offset the income with any associated expenses (bluebird fees, if any - credit card fees, mileage to CVS, allocated cost of internet service, computer, etc....)

This discussion and Announcement 2002-18 has been mentioned on the forums several times already.
#1,    #2,    #3, and #4.

The announcement addresses EARNING miles through business spending and redeeming them for personal use. It doesn't address selling them. Anything that you sell for more than you buy is income and taxable.
Assuming that earning miles doesn't trigger any tax liability, that would give you a tax basis of $0 and could mean that the full amount received in the sale is taxable...

[GAJ2303]

Not posting anything different, adding that you should deduct expenses from your income or as you put it "add it to your basis". This would reduce your tax liability from the sale of miles, which is excluded by the IRS relief. Either way, check with a your personal professional or MarkS.

This discussion and Announcement 2002-18 has been mentioned on the forums several times already.
#1,    #2,    #3, and #4.

The announcement addresses EARNING miles through business spending and redeeming them for personal use. It doesn't address selling them. Anything that you sell for more than you buy is income and taxable.
Assuming that earning miles doesn't trigger any tax liability, that would give you a tax basis of $0 and could mean that the full amount received in the sale is taxable...

[churnbabychurn]

Can't, or shouldn't?
The only reason I would imagine he would say you shouldn't (and possibly the reason that you wanted to count it) was if you were trying to increase your income to get the Earned Income Credit where you wanted it. In that case selling miles wouldn't count as income for the EIC unless it was a business, not just a small thing that you do here and there.

Other than that I don't see why he would say you 'can't' report it.
Now figuring out your basis to determine the amount of income is a whole different animal...

if its just something you do on the side it won't qualify for EIC? Why?

[MarkS]

if its just something you do on the side it won't qualify for EIC? Why?

Hmm, I assumed it from the IRSwording: Taxable earned income includes:
Wages, salaries, tips, and other taxable employee pay;
Union strike benefits;
Long-term disability benefits received prior to minimum retirement age;
Net earnings from self-employment if:
You own or operate a business

Looking at the list of disallowed income though, it's possible that 'hobby' income is included. Either way, the IRS frequently audits EIC claims reporting self employed income.