The 1099-Misc forms were met by surprise and furor by many of the recipients. The Wall Street Journal reported :

“The tax issue was only hinted at in the offer,” says Keith Sipos, a retired music teacher in San Diego who received a 1099 with $750 of income for 30,000 miles. “When I asked to have the miles rescinded, Citibank said I should have asked by the end of 2011. But I didn’t know about the tax until I got the form.”

Unfortunately for many of the 1099 recipients Smart Money reported that according to analysts, “the actual trips booked with the miles can be worth less than the amount of income reported by the credit card company.”

Are your frequent-flier miles taxable? Here’s a brief run down on what types of frequent-flier miles are taxable according to the Wall Street Journal article “Frequent-Flier Tax Traps.”

Taxable

• Miles awarded as prizes.
• Miles awarded for opening an account, such as a bank account.
• Miles awarded for putting money into a mutual fund.

Non Taxable

• Miles awarded by the airline for flying with them.
• Miles awarded for credit card use.
• Miles awarded for business travel.

Bottom line, consumers should concentrate their efforts on accruing frequent-flier miles through credit card purchases or through traveling and steer clear of mileage rewards by opening new accounts.

The post Frequent-Flier Beware: The IRS May Come Calling appeared first on TEQlease Capital.