Nowadays you have people earning points for just about everything. This ranges from credit card rewards, to points for flights and hotel stays, to earning points through all kinds of other third party transactions, from shopping online to buying flowers.
Continue reading: Are Rewards Points Taxable? It’s Complicated, Sort Of…
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For what it's worth, yes, the business side is murky. However, if you are following program rules, points earned from a business card are generally only supposed to be used for business expenses. Therefore, the reason the IRS doesn't invest much time or effort into this is because points travel would be theoretically replacing what would otherwise be a deductible business expense. If you use points earned from business spending for personal travel, it should be included in the value of taxable compensation. Big picture is that these programs are generally considered "de minimus" transfers, where it isn't worth anyone's time or effort to try and tax.
In Germany the tax office assumes that there is a monetary advantage for individuals who earn their miles on business trips but redeem them for private trips.
In fact Lufthansa pays flat taxation rates on behalf of the Miles & More members to cover this.
You note that you are not a tax professional then you either should not have addressed this topic or should have consulted a couple of tax professionals for this article because otherwise your comments are the same as what most people already know or can acquire online. This said, your article reminds me of a case where a bank account of some sort offered AA miles instead of interest and customers were sent a 1099. Regarding the business income, you are only supposed to use those rewards for business purposes anyway...
Your username is "I am here", but we're all asking "why?" I didn't see anyone call for an insufferable asshole, yet here you are.
Related question:
If you use points for a business expense, is it tax deductible? If so, how much?
An example would be when Ben uses points to book "pure review" trips, since these are solely for the business purpose of providing content for his blog.
A simple tax system with no loopholes that pays for great serviced, including healthcare that allows people to live 3 plus year longer, would be very welcomed by most Americans instead of this Byzantine system that nobody can figure out and which funds very little useful services (unless you find interminable presidential election campaigning as being useful)
Nice to have someone pop in with an answer like this. Also, there's a simple issue in trying to tax FF miles used by an employee earned on employer-paid travel: there's not an easy-to-follow paper trail (which is, of course, an electronic trail today). Simply, how would the IRS know I used FF miles earned on business travel for my vacation? They could try to make employers issue a 1099 for the miles earned each year. But, how do you value them? How does the employer even know how many miles you earned? So, you're right, it'd be a low yield use of IRS resources to try to do it. And, it's small potatoes anyway. Why worry about this when you don't tax employees on food/drink they get free at the company Xmas party? Yes, a very small cadre of business flyers earn many thousands dollars worth of miles on business travel. But, compared to what they're paid, it's easy to group it amongst the small (on a percentage basis) side job benefits of many jobs.
And certainly there is. But, I find it nitpicking. My employer can throw a party, deduct the cost in determining taxes, but I have no taxable income by eating three dozen shrimp.
In Germany you would be taxed for the 36 shrimps. Your employer is allowed a certain (low) amount of spending for “employee motivation”, which can be free soda or a pizza party etc. but outside business dinners (with other companies!) either emplyees have to declare free food etc. as a benefit in their taxes or the company has to pay the taxes for the employee.
If you think about it this is a smart move. I as an employee would calculate free food as a benefit and if two similar employees want to hire me for the same rate, I would choose the one with the free food, though neither he nor me has to pay for it. Go further and you have companies giving me free TV, PC for privat use etc. and a lot of money can circumvent the taxes.
Scandinavian countries tend to have higher income tax at all levels, plus high VAT tax on anything you order from outside the country. Most Americans would HATE this.
The US tax system itself is not complicated. What's complicated and what everyone is actually talking about when they say the tax code is full of loopholes, is what is defined as taxable income. The actual income tax schedule itself fits on half a sheet of paper, and for most Americans all you need to file taxes is your W-2 and maybe some 1099s from your banks. All the hard work of figuring out withholdings is already done by your employer. I'm convinced that 99% of the outrage over "complicated" US taxes is from crypto-bros mad that their gambling coins are now taxable and self-employed people who don't withhold what they owe the IRS.