303-415-2555 4450 Arapahoe Ave. Suite 100
Boulder, CO 80303

Reward Miles for Opening Financial Accounts Can Be Taxable

by Kristie on February 15, 2012

You may have received a 1099-MISC reporting the value of reward miles received during 2011 for opening a checking or savings account from Citibank. If you received this form your choices are to:

  • declare as income on your 2011 tax return
  • seek a correction of the Form 1099-MISC from the issuer if you believe it to be incorrect (good luck with this one)
  • independently explain the situation/issue to the IRS

Receipt of miles or other reward points has not been subject to information reporting if they were received through the use of your credit card to charge travel expenses reimbursed by your employer, or by using a business credit card directly. These reward miles are considered a rebate and lower the cost of the product/service being purchased. Announcement 2002-18 and IRS Letter Ruling 199920031.

However the miles given as an incentive to open a new checking or savings account are being considered a reward or bonus, which, by definition, is taxable as income.

Note: No formal IRS guidance as been published that directly addresses the situation in which reward MILES are given as an incentive to open an account.

Please contact us if you need  further guidance.

Comments on this entry are closed.

Previous post:

Next post: