1. Tuesday, January 31, 2012 - 7:47 PM
The IRS has been reluctant to tax airline miles, and it's hard to understand why Citi would want to force the issue by generating the 1099's or why they would have done so without a firm decision from the IRS.
If the IRS now decides the miles are taxable, then other institutions will have to follow suit (in future years), and bonuses would have to be a little richer to be worthwhile.
If the IRS decides the airline miles awarded for new accounts are not taxable, then Citi has to deal with a PR nightmare. Citi would likely have to generate corrected 1099's (and does anyone know if the IRS would penalize Citi for generating unnecessary 1099's in the first place?). Taxpayers who included the amount reported on Citi's 1099 in their income will have to file amended tax returns to recover the extra taxes paid.
If the IRS now decides the miles are taxable, then other institutions will have to follow suit (in future years), and bonuses would have to be a little richer to be worthwhile.
If the IRS decides the airline miles awarded for new accounts are not taxable, then Citi has to deal with a PR nightmare. Citi would likely have to generate corrected 1099's (and does anyone know if the IRS would penalize Citi for generating unnecessary 1099's in the first place?). Taxpayers who included the amount reported on Citi's 1099 in their income will have to file amended tax returns to recover the extra taxes paid.
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