Fidelity offering Apple Gift Cards for new deposits

[panacea]

For anyone that's interested, I read an article in the WSJ Sunday that said Fidelity is offering free Apple gift cards (up to $500) for new deposits to a non-retirement account. The article provides a run-down of offers from other competitors as well (including TD Ameritrade, Schwab and Etrade). The Fidelity one drew my attention though because that's where most of my money is and who doesn't like Apple? Here's a link to the offer on Fidelity's website:

https://scs.fidelity.com/other/offers/registration_tieredapplegiftcard.shtml

Here's the breakdown: $100 for a $75,000 deposit, $300 for $150,000 and $500 to $300,000+.

They don't seem to be voluntarily sharing the information so if you're in the process of opening accounts or transferring money, you need to register on their website (at the link). I've been talking to a few different reps there over the last few weeks about moving some money there and I never once received a "Hey thanks, and be sure to register for your free gift card." A gift card certainly isn't a good reason to transfer accounts from another broker you're happy with but it's kind of nice if you were going to move some funds anyway. I'm curious to know whether anyone else came across this offer... maybe this is old news.

 

[Bimmerbill]

You had me until $75K minimum.

 

[FUEGO]

They have been offering American Airlines miles for new accounts at fidelity (among other brokerages) as well. And I believe existing customers can take advantage of the AA miles by transferring in new funds in excess of the stated account minimums.

 

[Alan]

They have been offering American Airlines miles for new accounts at fidelity (among other brokerages) as well. And I believe existing customers can take advantage of the AA miles by transferring in new funds in excess of the stated account minimums.

There is now some debate on the future tax treatment of award miles since Citibank has been issuing 1099-MISC's to customers that it gave awards to for opening accounts. (note that you have to pay both employer and employee payroll tax on a 1099-MISC)

Citibank Tells IRS That Your Frequent-Flier Miles Are Taxable Income | Connecticut Consumer Advocate Protector Watchdog | Ct Consumer Complaints |Ct consumer Protection | Ct Advocate | Ct Consumer

It’s sending tax forms to people who received thousands of miles as a reward for opening a checking or savings account.
Those forms value each mile at about 2.5 cents and list the total dollar amount as miscellaneous income.

 

[Dimsumkid]

TDAmeritrade is doing the same thing. Here's their reward levels:

$100 Apple Gift Card for $50k - 99.9k,
$200 for 100k-249.9k,
$400 for 250k-999.9k or
$2000 (or 27" Imac or 15" MacBook Pro) for $1 mil or more.

Fine print states money needs to stay for 1 year (Fidelity is 9 months). Keep in mind you will get a 1099 only if your reward is $600 or more. This offer ends 4/30/12. I got an email last week and a targeted post card about this today.

https://www.tdameritrade.com/offer/apple/start.html

 

[panacea]

There is now some debate on the future tax treatment of award miles since Citibank has been issuing 1099-MISC's to customers that it gave awards to for opening accounts. (note that you have to pay both employer and employee payroll tax on a 1099-MISC)

Citibank Tells IRS That Your Frequent-Flier Miles Are Taxable Income | Connecticut Consumer Advocate Protector Watchdog | Ct Consumer Complaints |Ct consumer Protection | Ct Advocate | Ct Consumer

Interesting. I think this is also true for the Apple gift cards but I didn't think about potential payroll taxes . The value of the gift card is declining fast!!

 

[MichaelB]

There is now some debate on the future tax treatment of award miles since Citibank has been issuing 1099-MISC's to customers that it gave awards to for opening accounts. (note that you have to pay both employer and employee payroll tax on a 1099-MISC)

Citibank Tells IRS That Your Frequent-Flier Miles Are Taxable Income | Connecticut Consumer Advocate Protector Watchdog | Ct Consumer Complaints |Ct consumer Protection | Ct Advocate | Ct Consumer

It will be interesting to see how this develops. Airline miles and credit card rebates are not considered taxable income, the IRS deems them a partial refund of the price paid. This must have to do with how Citi books the cost of the award. Hard to see how it becomes earned income, though. If anything, a gift.

 

[Alan]

It will be interesting to see how this develops. Airline miles and credit card rebates are not considered taxable income, the IRS deems them a partial refund of the price paid. This must have to do with how Citi books the cost of the award. Hard to see how it becomes earned income, though. If anything, a gift.

I heard about it on the radio and searched out a link for the story. I think Citibank said that it treated it as a some sort of dividend, but that doesn't explain why they issue a 1099-MISC rather than a 1099-DIV or INT, and the news reporter couldn't offer an explanation either. With 25,000 miles valued at $625 that puts it $25 over the IRS limit. My old company used to offer rewards for perfect attendance, giving up tp $550 in gift cards, as that was the tax free limit at the time.

 

[Free To Canoe]

I heard about it on the radio and searched out a link for the story. I think Citibank said that it treated it as a some sort of dividend, but that doesn't explain why they issue a 1099-MISC rather than a 1099-DIV or INT, and the news reporter couldn't offer an explanation either. With 25,000 miles valued at $625 that puts it $25 over the IRS limit. My old company used to offer rewards for perfect attendance, giving up tp $550 in gift cards, as that was the tax free limit at the time.

The 1099-MISC requires a sch C tax form. Ouch!

 

[MichaelB]

I heard about it on the radio and searched out a link for the story. I think Citibank said that it treated it as a some sort of dividend, but that doesn't explain why they issue a 1099-MISC rather than a 1099-DIV or INT, and the news reporter couldn't offer an explanation either. With 25,000 miles valued at $625 that puts it $25 over the IRS limit. My old company used to offer rewards for perfect attendance, giving up tp $550 in gift cards, as that was the tax free limit at the time.

It seems this is a gift vs rebate matter, as Citi is treating this as a gift. The same amount in rebates is not taxable income.

“When frequent-flier miles are provided as a premium for opening a financial account, it can be a taxable situation subject to reporting under current law,” said Michelle Eldridge, an IRS spokeswoman.
There is little of a surprise that the IRS took this stance since Publication 550 already noted that financial institutions can report gifts that were given for opening accounts.
Citibank sent Form 1099-MISC to customers who took advantage of a promotion in the summer of last year that offered 25,000 American Airlines frequent flier miles.
IRS Backs Citibank on Tax Rule Over Rewards Miles - MyBankTracker.com

So Citi has assigned $0.025 per mile. Pretty steep. That means a 25K miles award is valued at $625. I think most destinations eligible at that mileage level are less expensive.

If you received a bunch of miles from Citi for signing up for one of the bank's credit cards or rewards-earning accounts, be on the lookout for a 1099-Misc tax form coming in the mail, as Citi has decided that these miles have a taxable value.
Citi has put a value of around $.025 on each mile, meaning that if you signed up for some program that rewarded you with 25,000 bonus miles, the bank says you owe taxes on $625 of miscellaneous income and it's telling the IRS about it.
Citi Says Those Free Rewards Miles You Received Are Taxable - The Consumerist

It seems, however, that Citi did disclose

Redemption of ThankYou Points related to your participation in ThankYou Rewards may result in your receipt of taxable income from Citibank in the tax year in which the ThankYou Points are redeemed. In accordance with U.S. tax law, Citibank may be required to send to you and file with the IRS a Form 1099-MISC (Miscellaneous Income) for the year in which a reward is issued to you. The valuation of ThankYou Point redemptions for Form 1099-MISC tax reporting purposes will be at Citibank’s sole discretion. You are solely responsible for any personal tax liability arising out of the redemption of ThankYou Points. Please consult with your Tax Advisor if you should have any questions regarding your personal tax situation.https://www.thankyou.com/tc.jspx

 

[TrvlBug]

For anyone that's interested, I read an article in the WSJ Sunday that said Fidelity is offering free Apple gift cards (up to $500) for new deposits to a non-retirement account. The article provides a run-down of offers from other competitors as well (including TD Ameritrade, Schwab and Etrade). The Fidelity one drew my attention though because that's where most of my money is and who doesn't like Apple? Here's a link to the offer on Fidelity's website:

https://scs.fidelity.com/other/offers/registration_tieredapplegiftcard.shtml

Here's the breakdown: $100 for a $75,000 deposit, $300 for $150,000 and $500 to $300,000+.

They don't seem to be voluntarily sharing the information so if you're in the process of opening accounts or transferring money, you need to register on their website (at the link). I've been talking to a few different reps there over the last few weeks about moving some money there and I never once received a "Hey thanks, and be sure to register for your free gift card." A gift card certainly isn't a good reason to transfer accounts from another broker you're happy with but it's kind of nice if you were going to move some funds anyway. I'm curious to know whether anyone else came across this offer... maybe this is old news.

$500 would just about cover an ipad which I would love to have surfing while couching and watching TV...my 15" Macbook Pro is such a pain. I have a call in to my AE hoping that they will make an exception and offer it if I roll over my Vanguard 401K to a Fidelity IRA. Can't hurt to ask! The majority of our funds, both retirement and non-retirement are with Fidelity and I was debating moving the Vanguard to Fidelity. Just retired last fall and this is one of the things on my to do list...to roll over the 401k to a Vanguard or Fidelity IRA.

Another question wrt to the ipad...do you need to purchase a data plan or does the ipad work just like a Mac wrt to surfing the web?

 

[Bestwifeever]

$500 would just about cover an ipad which I would love to have surfing while couching and watching TV...my 15" Macbook Pro is such a pain. I have a call in to my AE hoping that they will make an exception and offer it if I roll over my Vanguard 401K to a Fidelity IRA. Can't hurt to ask! The majority of our funds, both retirement and non-retirement are with Fidelity and I was debating moving the Vanguard to Fidelity. Just retired last fall and this is one of the things on my to do list...to roll over the 401k to a Vanguard or Fidelity IRA.

Another question wrt to the ipad...do you need to purchase a data plan or does the ipad work just like a Mac wrt to surfing the web?

You don't have to purchase a data plan for iPads--you can connect to regular wifi with them.

 

[panacea]

You had me until $75K minimum.

True, it's not like the old open a bank savings account and get a toaster!

 

[Sesq]

The 1099-MISC requires a sch C tax form. Ouch!

A promo should be reported on Box 3 (Other Income), which I would treat as other income (line 21 form 1040), not SE income(fill out schedule C, carry to Line 12, form 1040). If they report it in Box 7 (Nonemployee Comp), then the IRS would be looking for the social security/SE taxes.

Unless your trade or business is collecting promos (which, on some other forums it looks like some are).

 

[ronocnikral]

i know there are people on flyertalk who are cycling $25k to get 50,000 airline miles on two airlines and then those who have at least $75k are getting apple gift cards.

if it was just miles, I would tell citi & the IRS to shove it, as you don't technically own the miles and they can be revoked at anytime (or expire).

but, i'll probably look good in stripes.

 

[FUEGO]

i know there are people on flyertalk who are cycling $25k to get 50,000 airline miles on two airlines and then those who have at least $75k are getting apple gift cards.

if it was just miles, I would tell citi & the IRS to shove it, as you don't technically own the miles and they can be revoked at anytime (or expire).

but, i'll probably look good in stripes.

I don't book receipt of airline miles in my accounting system until they are used because the value is too speculative until then. That is what I tell the IRS anyway...

Maybe if the IRS would offer to buy all my airline miles at $0.025 per mile, I will gladly allow them to keep the tax I owe on the transaction. But since currently there is no way for me to get $0.025 per mile I don't see how I could value them at that. I have always assumed something closer to $0.01 per mile (ie I would take $250 cash for 25,000 miles). I think the conventional wisdom at flyertalk forums is something like $0.018 per mile is a reasonable value for AA miles (some of the best miles).

 

[Free To Canoe]

A promo should be reported on Box 3 (Other Income), which I would treat as other income (line 21 form 1040), not SE income(fill out schedule C, carry to Line 12, form 1040). If they report it in Box 7 (Nonemployee Comp), then the IRS would be looking for the social security/SE taxes.

Unless your trade or business is collecting promos (which, on some other forums it looks like some are).

Yes, if it is under $600.

 

[MichaelB]

I don't book receipt of airline miles in my accounting system until they are used because the value is too speculative until then. That is what I tell the IRS anyway...

Maybe if the IRS would offer to buy all my airline miles at $0.025 per mile, I will gladly allow them to keep the tax I owe on the transaction. But since currently there is no way for me to get $0.025 per mile I don't see how I could value them at that. I have always assumed something closer to $0.01 per mile (ie I would take $250 cash for 25,000 miles). I think the conventional wisdom at flyertalk forums is something like $0.018 per mile is a reasonable value for AA miles (some of the best miles).

The $0.025 is determined by Citibank, not the IRS.