Gut Check: Making simple sense out of life
By Lenore Skomal Erie Times-News staff blogger
Lenore Skomal is an award-winning author and veteran journalist in all forms of media. She is a weekly columnist and daily blogger for the Erie Times-News. She’s authored 17 published books, including an anthology of her columns, Burnt Toast available on her website www.lenoreskomal.com.   Read more about this blog.
Posted: February 3rd, 2012
Frequent flier miles are now taxable?

Say it ain’t so! I have at least one sibling and a whole boatload of friends who’ll be none to happy to read this. But they don’t have to worry if they earned those miles the traditional way.

The Associated Press reports that American Airlines gave away frequent flier miles to those opening a checking or savings account last year with Citibank.

The bank has sent out tax forms to those who took those frequent flier miles. The 1099s–tax forms for independent contractors that show how much they make–came in the mail to a slew of outraged customers.

According to USA Today, the question about if the miles are taxable hinges on whether or not they are viewed as a “gift.” According to Citibank, when a customer receives a gift for opening a bank account, the value is treated as income. And as income, it has to be reported to the IRS.

I have no knowledge of tax law, thank God. But those who do are at odds at how to interpret this. The IRS isn’t clear, according to the LA Times, because in the past, it has taken the stance that frequent flier miles, earned the old fashioned way, are not taxable. The simple fact the miles were given as a bonus, however, creates another wrinkle. I guess we’ll have to stay tuned.

During this election year, with politicians slugging it out over taxes, the timing couldn’t be worse. In case you don’t think this is a big deal, Citibank valued the miles at roughly 2.5 cents a mile–or roughly $625 for 25,000 miles.

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