Currently, control and disposition of frequent flyer miles that you earned during the course of business travel are in the hands of your employer. Some employers require their employees to return earned mileage to the company. Other employers, admittedly very few, deem frequent flyer points to be part of their employees' compensation. The vast majority of employers take no action, and allow employees to retain frequent flyer miles, which they earned during business travel, for their personal use.
The IRS is on record that, until further notice, it will not include frequent flyer miles in anyone's income. This includes situations in which miles are earned either for business travel or for personal expenditures. Several years ago, the IRS had attempted to tax frequent flyer miles as compensation. However, it backed off after airlines, transportation trade associations, and business groups complained that the IRS's approach was unworkable. Although the IRS reserves the right to reassert the position that miles should be taxed, for all practical purposes, it will continue to exempt these miles from tax unless the IRS can develop an administratively feasible way to do so — not a likely possibility for the foreseeable future.
For more information contact The Henssler Financial Group Tax & Accounting Division at (770) 428-4025.
