Bank "Rewards Points" are Taxable

Bank "reward points" taxable. When S opened a bank account he was given 50,000 "reward" or"thank-you points." He later converted the points to an airline ticket. The bank issued him a 1099-MISC valuing the ticket at $668. He did not report this amount on his 1040, believing it was not income. The IRS assessed taxes and penalties for under-reporting income.

Held:  For the IRS. Bank reward points are essentially interest--compensation for use of a taxpayer's money or for maintaining a minimum account balance. Taxpayers must include the value of the ticket under "other income."

Written in the General Ledger October Newsletter 2014.

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