Here is the thing. Often, when travelling for work, the company pays for the flight, but the traveler get the points, the traveler can then use the points for personal travels.
Maybe the frequent flyer programs are worth more than the business of flying planes, but without business travel expenses, my guess is that you wouldn't have these bank-like frequent flyer programs. As the article mentions, these are just kickbacks.
Without business travel expenses the airline industry would also be a fraction of its size and personal air travel would be much more expensive.
Companies have on occasion tried to claw back frequent flier points from employees. Those policies were not popular personally I have zero issue with people who fly a lot getting a minor perk for a lifestyle I suspect many people here would absolutely hate.
If you got rid of business passengers, you'd have to increase rates to get the same profit, sure, but I suspect competition would keep prices low. The reason business rates are higher is because big businesses don't look too closely at prices and better service is seen as a little perk for employees.
I’ve seen somewhat higher numbers but I’m still surprised it’s that low if only because many business travelers travel so much more. It’s the rare person who travels 50K miles per year for pleasure and that’s not a typical company employee for many positions but it’s by no means an outlier.
Business travel, especially sales, also involves a lot of last minute booking and changes and those are expensive on both many planes and long distance trains. But, yes, at most companies you can’t just book business but you can always plead better schedule and also avoid economy basic sort of torture.
You're correct, but (IMO) it's such a weird stance for the IRS to take. In response to "is X taxable income?" for almost all values of X, it seems like the IRS's answer is yes, if non-trivial amounts of money are involved.
You sell a couple of items on eBay, yeah it's fine not to report that as income. But if you sell tens of thousands of dollars worth of stuff on eBay the IRS would see that as taxable income.
Your kid has a savings account with a hundred bucks in it and they earn a few dollars interest - not taxable! You keep $100k in a savings account and earn thousands in interest, yep the IRS gets notified and you pay taxes on it.
You earn a handful of frequent flier miles this year after a couple of trips home to see Grandma? Nah, that's not taxable. But if you travel multiple times per week for work and accrue tens of thousands of dollars worth of flier miles that you get to keep? Not taxable income for some reason. shrug
> You earn a handful of frequent flier miles this year after a couple of trips home to see Grandma? Nah, that's not taxable.
Those would never be taxable, as you paid for the miles. When a company sends you a rebate check for an item you bought for personal consumption or when you buy a gift card, it's also not taxable income as it's in exchange for [post-tax] money that you paid.
> But if you travel multiple times per week for work and accrue tens of thousands of dollars worth of flier miles that you get to keep? Not taxable income for some reason.
The IRS alludes in their policy statement to the complexity as being the reason to not treat it as income. If I flew for work for a decade and accrued a bunch of miles and redeemed them only later, in what year would they be taxable? If I mixed personal and business travel in earning miles, what portions would be taxable and when? If the miles are subject to a substantial risk of forfeiture, that would usually be treated the same as other possible future income which is still subject to a risk of forfeiture (which is to say: not be taxed until that risk has collapsed to zero).
> Those would never be taxable, as you paid for the miles
Good point.
> If I flew for work for a decade and accrued a bunch of miles and redeemed them only later, in what year would they be taxable?
The year you redeem them I would think. Just like you don't recognize typically recognize investment gains until you actually sell and receive those gains. It'd be nonsensical to tax me on fake airline bucks for an airline that might be out of business later this year, or might devalue their points. The (as I would see it) taxable benefit occurs when I successfully redeem those fake airline bucks for a real, valuable service.
> If I mixed personal and business travel in earning miles, what portions would be taxable and when?
Seems like you'd need to maintain separate accounts, so when you redeem them you say, "yeah I'm using 20k points from my personal account and 30k from my employer-paid perk account, knowing I'll be taxed on the current value of the 30k taxable points".
Overall it does seem like a PITA, it's just funny to me because "this is too much of a pain to deal with so let's ignore it" doesn't seem like something the IRS usually says. I suppose overall the issue must be (as another commenter put it) "small potatoes" to the IRS.
And it’s small potatoes mostly. Leaving aside airline status-which would be impossible to value even my 50K miles per year pre-pandemic (some of it personal) would only be worth $500 or so at a penny per mile.
AFAICT, cash rewards to an individual on expenses reimbursed by a company are taxable as income. Non-cash rewards are a bit of a gray area that the IRS believes to be taxable, but is currently agreeing to not pursue for the time being.
Here is the thing. Often, when travelling for work, the company pays for the flight, but the traveler get the points, the traveler can then use the points for personal travels.
Maybe the frequent flyer programs are worth more than the business of flying planes, but without business travel expenses, my guess is that you wouldn't have these bank-like frequent flyer programs. As the article mentions, these are just kickbacks.