Do you have to claim this on your taxes?

herm4 · #1 (**permalink**) 09-07-2007, 07:11 PM

Do you have to pay taxes on "cash back" money from using a Discover Card. What if you redeem the cash back as a gift card. Is it then a "gift". Confused....

safari · #2 (**permalink**) 09-08-2007, 12:58 AM

No, you don't need to claim cash back money as income on your tax return. Cash back is similar to rebates, where you get part of the purchase price refunded to you. You don't earn any income that way, so there is nothing to declare.

herm4 · #3 (**permalink**) 09-08-2007, 05:34 AM

Quote:

Originally Posted by safari

No, you don't need to claim cash back money as income on your tax return. Cash back is similar to rebates, where you get part of the purchase price refunded to you. You don't earn any income that way, so there is nothing to declare.

Thanks so much!

disneysteve · #4 (**permalink**) 09-08-2007, 07:50 AM

Is the same true for other rewards, like air miles or hotel stays?

poundwise · #5 (**permalink**) 09-08-2007, 08:46 AM

Generally card rewards are treated as non-taxable rebates or discounts on the price of merchandise purchased. Airline miles are also viewed in much the same way by the IRS; as are rebates offered on new car purchases.

The only credible issue I have seen raised regarding cash back credit card rewards:

1) If you use a card to purchase items that are deductible (i.e. - business expenses) then you receive a rebate based on those purchases, then, theoretically, you have reduced the basis (cost) of those items and that would need to be considered when calculating the business expenses deduction for your taxes.

Less complicated, perhaps, but similar is that I have read that:

2) If you obtain a free airline ticket because of miles accumulated for business travel; the expenses for which were claimed as a business expense, and then the free ticket is used for personal use, then the value of that ticket is, again theoretically, taxable. (I assume the same may hold true for 'free' hotel stays, etc.)

Ultimately, the IRS doesn't seem to have a stated position on this, even in those cases.

For most people, there simply isn't an issue with getting 'gifts', rooms, flights, or even cash back rewards from various programs. The only potential issue seems to come in when accumulating those rewards via purchases that you deduct as business expenses.

Aleta · #6 (**permalink**) 09-08-2007, 09:28 AM

How about people who do surveys. How do they view that even if it was unver $500.

herm4 · #7 (**permalink**) 09-08-2007, 09:37 AM

Quote:

Originally Posted by Aleta

How about people who do surveys. How do they view that even if it was unver $500.

If you make $600 or more, on any one site, it will need to be reported.

disneysteve · #8 (**permalink**) 09-08-2007, 12:28 PM

Quote:

Originally Posted by herm4

If you make $600 or more, on any one site, it will need to be reported.

No. If you make $600 or more, the company has to report it. You, technically, need to report the income earned regardless of the amount.

herm4 · #9 (**permalink**) 09-08-2007, 02:41 PM

Quote:

Originally Posted by disneysteve

No. If you make $600 or more, the company has to report it. You, technically, need to report the income earned regardless of the amount.

That's what I meant.

scfr · #10 (**permalink**) 09-11-2007, 11:22 AM

I suppose on the surveys you have to follow your conscience, because you are supposed to report them but the earnings don't get reported to the IRS unless you go over a certain amount. I joined Pinecone this year and I'm going to report my earnings; I have a list in my 2007 tax file where I make a note each time I get paid by Pinecone ($40 YTD).

fam5d07 · #11 (**permalink**) 10-19-2007, 06:02 AM

great info thanks:0

InDebtInDC · #12 (**permalink**) 10-19-2007, 09:57 AM

poundwise and disneysteve made very good points. I have nothing more to add other than to reiterate their comments.

Aleta · #13 (**permalink**) 10-19-2007, 02:37 PM

Do you have to pay social security on surveys or is it considered passive income?

disneysteve · #14 (**permalink**) 10-19-2007, 04:00 PM

Quote:

Originally Posted by Aleta

Do you have to pay social security on surveys or is it considered passive income?

That's a good question and I honestly don't have a clue. I max out SS taxes from my regular income so it isn't an issue for me. I'm sure someone else knows.

cicy33 · #15 (**permalink**) 10-19-2007, 04:26 PM

Quote:

Originally Posted by scfr

I suppose on the surveys you have to follow your conscience, because you are supposed to report them but the earnings don't get reported to the IRS unless you go over a certain amount. I joined Pinecone this year and I'm going to report my earnings; I have a list in my 2007 tax file where I make a note each time I get paid by Pinecone ($40 YTD).

Would this also open a window to deduct part of your internet usage? as you use to earn this money? It is part of your job.

disneysteve · #16 (**permalink**) 10-19-2007, 07:02 PM

Quote:

Originally Posted by cicy33

Would this also open a window to deduct part of your internet usage? as you use to earn this money? It is part of your job.

Absolutely. I've deducted a portion of my internet usage and my computer when reporting my ebay income. No reason you couldn't do the same with your survey income. It is considered a form of self-employment.

TurningColorz · #17 (**permalink**) 11-02-2007, 06:07 PM

Quote:

Originally Posted by disneysteve

Absolutely. I've deducted a portion of my internet usage and my computer when reporting my ebay income. No reason you couldn't do the same with your survey income. It is considered a form of self-employment.

I wonder how many other ebay sellers claim thier income?
Can the IRS audit your ebay and PayPal accounts? It seems like there's enough money being transacted on ebay to arrouse the IRS. Now that I think about it, I don't remember getting a statement of interest earned on my PayPal Money Market account. Hmmm.

Mike - TurningColorz

sweeps · #18 (**permalink**) 11-02-2007, 06:21 PM

The IRS has been trying to get ebay sales data. But keep in mind many sales on ebay are not taxable events. If I buy something new for $100 and after some time sell it on ebay for $100 or less, there was no profit on that.

You definitely should be getting a 1099 for your Paypal money market interest. Maybe the form got lost in the mail?

disneysteve · #19 (**permalink**) 11-02-2007, 07:30 PM

Quote:

Originally Posted by TurningColorz

I don't remember getting a statement of interest earned on my PayPal Money Market account.

Did you earn at least $10.00 in interest? Often, banks won't send a 1099 for less than that. You can log on to your account and print the 1099 yourself, though.

Quote:

Originally Posted by sweeps

But keep in mind many sales on ebay are not taxable events. If I buy something new for $100 and after some time sell it on ebay for $100 or less, there was no profit on that.

Keep in mind that a transaction being taxable and being reportable are two different things. Let's say that throughout the year, you sell 5 of those $100 items per month. You've made no profit but at year end there will be $6,000 in your account that you didn't have before. If you are the victim of an IRS audit, you can be quite sure they will want to know where that money came from. I occasionally sell items at a loss, or sell personal items for less than I originally paid. I still report those transactions. I just don't owe any taxes on them.

TurningColorz · #20 (**permalink**) 11-03-2007, 06:02 AM

Ok, I found my PayPal 1099 in last years taxes.

It's well over ten dollars, but thanks for reminding me of the $10 threshold, I forgot about that limit.
Nice article sweeps! I should have known the IRS was on top of it. Eventually, when they're in a position to act on it, I imagine they'll offer some kind of "Amnesty" for those who "come clean" ahead of time. I imagine the easiest thing for the feds to pick-up on would be unreported income, any more than that would require a formal audit, and some legwork.

Mike - TurningColorz