31 Replies Latest reply: Oct 28, 2013 8:27 AM by anadyr RSS

Miles and Points taxable?

Alumni Steward Platinum 8 Reviews
Currently Being Moderated

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  • Re: Miles and Points taxable?
    shoeman1000 Platinum 4 Reviews
    Currently Being Moderated

    I do not believe so.  to date, the only miles the IRS has gone after have been points given for simply signing up for a credit card.  One could argue that you did nothing to earn those points, but were given them as a cost of doing business.  I do  not anticipate a change in philosophy from the government, and if they do, I would expect companies to find a way around those rules.  No worries.....

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    • Re: Miles and Points taxable?
      Alumni Steward Platinum 8 Reviews
      Currently Being Moderated

      Hmm, assuming the federal and state government will not tax a potential revenue stream?  Fascinating.  They will go after prizes (I got a 1099 with the check after winning a 500 dollar prize in a radio contest)

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      • Re: Miles and Points taxable?
        shoeman1000 Platinum 4 Reviews
        Currently Being Moderated

        of course you did.  it is totally different.  same as winnings in vegas over a certain amount are taxed.  Let's see, these programs have been on the books for 30+ years, has anyone yet been taxed???  I don't believe the sky is falling.....  but keep your head up!

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        • Re: Miles and Points taxable?
          Alumni Steward Platinum 8 Reviews
          Currently Being Moderated

          Maybe we should be sure no IRS folks are on this forum?

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          • Re: Miles and Points taxable?
            shoeman1000 Platinum 4 Reviews
            Currently Being Moderated

            just because you are paranoid, doesn't mean someone isn't out to get you........

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          • Re: Miles and Points taxable?
            esquireflyer Gold 8 Reviews
            Currently Being Moderated

            Don't worry. The IRS has been thinking about this issue for many years already--no one here is "spilling the beans" to the IRS.

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  • Re: Miles and Points taxable?
    jasper100 Alumni Steward Platinum 10 Reviews
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    I am with Shoeman on this..I do not think the IRS will pursue this as it would be too costly to implement and very unpopular!!!

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    • Re: Miles and Points taxable?
      Alumni Steward Platinum 8 Reviews
      Currently Being Moderated

      Hmm, you think the IRS would miss a chance to get more revenue?

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      • Re: Miles and Points taxable?
        shoeman1000 Platinum 4 Reviews
        Currently Being Moderated

        Not at all.  I think they would tax tax if they could.  BUT, I suppose you have heard of Lobbyists?  I would suggest to you that those that work in the Hospitality field would be working overtime to squelch anything of the sort you rate suggesting. 

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        • Re: Miles and Points taxable?
          Alumni Steward Platinum 8 Reviews
          Currently Being Moderated

          Actually if the thread I started is true, the industry would not feel that bad if the bennies were taxed, since those bennies cost them money too

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        • Re: Miles and Points taxable?
          nuhusker Platinum 2 Reviews
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          Don't we already pay taxes on taxes?  How about the FICA tax which funds SS which in turn is taxed?

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          • Re: Miles and Points taxable?
            Alumni Steward Platinum 8 Reviews
            Currently Being Moderated

            We do, and we also pay an inheritance tax on money earned and taxed when we die.

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            • Re: Miles and Points taxable?
              pluto77 Alumni Steward Gold 25 Reviews
              Currently Being Moderated

              We definitely pay tax on tax.  We are taxed twice all the time.  In California, you pay sales tax on the purchase of a used car that someone previously paid sales tax on.  (Aside from the fact that it often seems like the IRS can do whatever they want,) I don't see how the IRS can tax miles or points.  I spent previously taxed dollars to earn those points!  The points that we earn are also factored into the price point.  Nothing is free.

               

              If they start taxing points or miles I will become an ugly. (If they start taxing my payroll deduction for health insurance, I will become an ugly!) 

               

              Better stop there.  Probably already went too far.  Sorry.  Not soliciting further comment.

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              • Re: Miles and Points taxable?
                Alumni Steward Platinum 8 Reviews
                Currently Being Moderated

                Hope the IRS is not monitoring this site!  Actually our only salvation is that medicine and food are for the moment, not taxed!  I wonder how See's Candy, a venerable purveyor of chocolate goodies, got themselves exempted from paying or charging CA sales tax.

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                • Re: Miles and Points taxable?
                  pluto77 Alumni Steward Gold 25 Reviews
                  Currently Being Moderated

                  I guess the same way that potato chips and ice cream and candy bars and hot dogs (and pink slime!) are not taxed.  But soda is, I believe...along with tobacco and alcohol and gasoline and used cars and what about all of those crazy fees that are added to telecommunications and utility bills...

                   

                  And I will be an "uglier" if they ever decide to tax prescriptions  (who thinks this stuff up anyway?)  No wonder people look the other way when paying housekeepers and gardners.  Not me of course(!)

                   

                  American taxation is strange and absurd.

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                  • Re: Miles and Points taxable?
                    Alumni Steward Platinum 8 Reviews
                    Currently Being Moderated

                    Actually most snack foods are taxed in CA, including sodas.  See's is alone in being tax free.

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                    • Re: Miles and Points taxable?
                      pluto77 Alumni Steward Gold 25 Reviews
                      Currently Being Moderated

                      Ah, you've thrown down the gauntlet, SS.  I will be doing recon soon to verify!

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                      • Re: Miles and Points taxable?
                        Alumni Steward Platinum 8 Reviews
                        Currently Being Moderated

                        Stop by any See's store (in CA and not at airports--has to be a company owned place--and see what is up.  I hesitate to speak with the FTB here since they may have missed the ability to hit us in the candy pockets!  I note from a less than thorough search of the Internet that the state of Colorado, as of 2010, decided to lift the exemption on candy and all out of state manufacturers. See's is made here in the golden state so it qualifies.  Take that Warren Buffett (since Berkshire/Hathaway is their parent).

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      • Re: Miles and Points taxable?
        esquireflyer Gold 8 Reviews
        Currently Being Moderated

        They would, and they have--for example, if the administrative hassle of collecting/enforcing the taxes is so high that it outweighs the revenue potentially earned.


        Check out this IRS notice from 2002 announcing that they won't go after people, in most cases, for frequent flier miles earned by flying on tickets purchased by their employers (note: very narrow situation; does not apply as a blanket rule on all miles).

         

        http://www.irs.gov/pub/irs-drop/a-02-18.pdf

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        • Re: Miles and Points taxable?
          Alumni Steward Platinum 8 Reviews
          Currently Being Moderated

          And the IRS is undergoing a shrinkage in personnel and ability to chase people

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  • Re: Miles and Points taxable?
    esquireflyer Gold 8 Reviews
    Currently Being Moderated

    This is an area of significant ambiguity, in which the IRS has not said very much (and could announce/change its policies at any time). But currently, it seems that the taxability of miles depends on how the miles are earned.

     

    (1) Miles earned from credit card spending are generally considered rebates on the purchases, and not taxable (although the IRS could decide to start taxing these--but there hasn't been any sign that they are planning to do so in the near future).

    (2) Miles earned for banking activity (checking, savings, etc.) are generally considered a form of interest, and taxable as such (based on fair market value of the miles--which is an area of serious ambiguity). For example, Citibank is known for issuing 1099s to people based on banking activity.

    (3) The IRS has officially announced that, because of administrative issues, it will generally not be assessing income taxes on miles earned by employees for travel paid for by employers. (But the IRS can also officially change this policy going forward by publishing a new announcement.) However, if an employer is using miles for tax avoidance purposes (e.g. paying an employee entirely in miles, and no salary) the IRS reserves the right to assess for taxes.

    (4) Miles won as prizes are considered taxable just like a cash prize would be (but again the FMV of the miles is ambiguous, which creates some conflicts when the prize awarder and the prize recipient disagree on the value of the miles).

    (5) Miles earned for airline travel, on tickets you pay for yourself, are generally considered rebates and not taxable.


    Points are generally similar to miles: it depends on how you earned them.

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    • Re: Miles and Points taxable?
      shoeman1000 Platinum 4 Reviews
      Currently Being Moderated

      thanks Esquireflyer!

       

      I whole-heartily agree with your assessment of the points/miles  issue.  To think that a post on this site would somehow ALERT the IRS  is ridiculous.  Also, as you aptly point out, there are many different ways points/miles are earned and only a few of those will likely be considered as taxable.  Thanks for keeping it real.

      (For each location tag, you will be guided through a 3-step process to add (1) a city and a state or a city and a country, (2) a Marriott brand, and (3) a Marriott hotel.)

    • Re: Miles and Points taxable?
      Alumni Steward Platinum 8 Reviews
      Currently Being Moderated

      Excellent explanation and thanks

      (For each location tag, you will be guided through a 3-step process to add (1) a city and a state or a city and a country, (2) a Marriott brand, and (3) a Marriott hotel.)

  • Re: Miles and Points taxable?
    jerrycoin Alumni Steward Platinum 60 Reviews
    Currently Being Moderated

    SS,

     

    I am really surprised that is gone this long with "No tax" on FF programs.  I think it is a matter of time and it will be implemented.  I have had to pay tax on some rooms that I used points for.

     

    Wouldn't the companies want to do away with this "Liability"?

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    • Re: Miles and Points taxable?
      Alumni Steward Platinum 8 Reviews
      Currently Being Moderated

      The IRS works in strange and mysterious ways, and having been audited I can tell you they are a worthy adversary.

      (For each location tag, you will be guided through a 3-step process to add (1) a city and a state or a city and a country, (2) a Marriott brand, and (3) a Marriott hotel.)

      • Re: Miles and Points taxable?
        esquireflyer Gold 8 Reviews
        Currently Being Moderated

        Yikes!! I hear that audits are really not fun. >.<

        (For each location tag, you will be guided through a 3-step process to add (1) a city and a state or a city and a country, (2) a Marriott brand, and (3) a Marriott hotel.)

        • Re: Miles and Points taxable?
          Alumni Steward Platinum 8 Reviews
          Currently Being Moderated

          not even with the best lawyers,

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  • Re: Miles and Points taxable?
    superchief1 Platinum
    Currently Being Moderated

    Also keep in mind that many of us pay for our MR points. MVC owners can convert their timeshare weeks to MR points. I paid to purchase the timeshare, and pay annual maintenance fees for them. If I convert my Royal Palms week for 110,000 MR points, it currently costs me $1100 in MF for those points. Over 1/2 of my MR points have come from timeshare purchase bonuses (therefor a rebate) and point conversion.

     

    Note: Food in Kansas is also taxed at almost 9% state and local rate. Although Kansas is supposed to be a conservative state, it taxes everything.

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  • Re: Miles and Points taxable?
    bpelican Platinum 57 Reviews
    Currently Being Moderated

    So far, so good.  Hope it never comes to pass as taxes are paid on the travel expenditures already.  Keeping fingers crossed!

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    • Re: Miles and Points taxable?
      Alumni Steward Platinum 8 Reviews
      Currently Being Moderated

      I see that some states are considering having black boxes installed in personal cars to allow per mile taxation, so the creeping tax man is still alive and well!

      (For each location tag, you will be guided through a 3-step process to add (1) a city and a state or a city and a country, (2) a Marriott brand, and (3) a Marriott hotel.)

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