There has always been a question of whether frequent flier miles are taxable income. They can be worth a significant amount of money when the employee is a frequent traveler. The answer came in 2002 when the IRS issued a ruling that "numerous technical and administrative issues" made it too difficult to track. As a result they were not considered taxable income.

Citibank had a promotion last year giving frequent flier miles for customers opening new accounts. Now these customers are getting 1099s for the miles. They have valued them at 2.5 cents per mile. Many of these customer received 25,000 miles or $645 in income. For the basic tax bracket at 28% that is additional taxes of $180.60.

I am sure that none of the people who opened the accounts expected to be taxed on the promotion. The IRS has said that the 2002 still stands. If that is true then Citibank is at the least confusing all of their customers and surely causing some of them to overpay their taxes by $180.60.

Before you file your taxes make sure you talk with a qualified tax accountant.They keep abreast of all the changing tax laws so you can go out and enjoy all of those frequent flier miles.