Archive for Thursday, February 21, 2002

IRS clears frequent-flier miles from taxes

February 21, 2002


— Business travelers who use their frequent-flier miles for personal trips won't get grounded by the IRS.

Seeking to clear up confusion, the Internal Revenue Service announced Wednesday it would "not assert" that frequent-flier miles accrued on business or official travel should be counted as taxable income when they are converted to personal use.

Some legal interpretations have held that these miles are just another form of compensation not exempted from taxation. But IRS officials say it would be difficult to place a value on the miles and to separate those a taxpayer got on personal trips or through credit cards from those obtained through business travel.

Because of these difficulties, the IRS has never pursued an enforcement program on frequent-flier miles or other similar benefits from business trips. Wednesday's announcement is intended to put any lingering questions to rest.

"It's very difficult for taxpayers to comply," agency spokesman Frank Keith said. "They don't have to report them. We will deem them to have met their tax obligations."

Organizations representing airline passengers hailed the move, coming as air carriers struggle to recover from the terror attacks.

David Stempler, president of the Air Travelers Assn., said frequent flier miles ranked third in importance, behind price and schedule, among factors people consider when deciding which airline to fly.

"One of the things that attracts people to flying is their miles. And they create customer loyalty," Stempler said.

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