Senator to Citi: Enough already with the tax forms for frequent-flier miles

Even though tax law seems clear that frequent-flier miles do not have to be reported to the Internal Revenue Service, an influential U.S. senator is calling out Citibank for telling customers they need to do just that. Sen. Sherrod Brown, chairman of the Senate Banking Subcommittee on Financial Institutions and Consumer Protection, today sent Citigroup Inc. chairman Vikram Pandit a letter directing the bank to stop sending 1099 tax forms to consumers for frequent-flier miles they accrued by opening checking and savings accounts. “Your actions are leaving working families with the seemingly incorrect impression that when they rack up miles, they are hiking up their taxes, too,” Mr. Brown, D-Ohio, wrote. “The last thing Citibank should be doing is creating baseless fear in middle-class families or placing a nonexistent tax burden on the backs of families who are already struggling to make ends meet.” The senator took up the issue in response to a Los Angeles Times story last week that reported Citibank, the consumer banking arm of Citigroup, is sending the 1099 forms to its consumers who received thousands of miles in return for opening accounts. On the tax forms, Citibank listed a total amount for the miles as miscellaneous income, valuing each mile at about 2.5 cents, according to Mr. Brown's letter. He called that amount “arbitrary.” A Citibank representative said the bank was interpreting a 2012 rule that requires individuals to report as income rewards and prizes of more than $600, according to the letter. Citigroup did not immediately return a call seeking comment. Mr. Brown said the miles are neither a prize nor an award, pointing out a 2002 IRS notice that states frequent-flier miles are not subject to income tax. An IRS representative told the senator's office that the 10-year-old guidance still stands.