Are 1099-K forms being issued for cash back sites like Rakuten? How should I report this?
So I just found out something frustrating with this whole 1099-K mess. Apparently PayPal is sending out 1099-K forms for cash back I received from sites like Rakuten and TopCashback! I wasn't expecting this at all. I've been using these cash back portals for a couple years to save a little money on online purchases (mostly household stuff and some gifts), and now I'm confused about the tax implications. Does anyone know if cash back from these shopping portals counts as taxable income? I earned about $240 from Rakuten and maybe $175 from TopCashback last year. If it is taxable, do I have to report it as capital gains using Schedule D and Form 8949? Or is it considered some other type of income? I don't want to mess up my taxes, but this seems ridiculous to be taxed on what's essentially a discount on purchases. Any advice would be super helpful!
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Manny Lark
Cash back from shopping portals like Rakuten and TopCashback exists in a bit of a gray area tax-wise, but I can help clarify this for you. Generally speaking, the IRS considers cash back from these sites to be a rebate or discount on your purchase, not taxable income - provided you're getting cash back on personal purchases. This is similar to using a coupon or getting a mail-in rebate. The key distinction is that you're not "earning" money, but rather receiving a reduction in the price you paid for items. However, if PayPal issued you a 1099-K for these amounts, it's because they're simply reporting the money that passed through their platform - they don't determine the tax treatment of that money. The 1099-K is an information return that doesn't automatically mean the amount is taxable. If these were personal purchases (not business expenses you deducted), you generally don't need to report this as income or capital gains on Schedule D/Form 8949. You should keep records of your cash back amounts in case of questions, though.
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Rita Jacobs
•But what if some of the purchases were actually for my small business and I did deduct them as business expenses? Would I need to subtract the cash back from the expense amount? Also, does this change if the total is over $600 for the year?
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Manny Lark
•If some purchases were for your business and you deducted them as business expenses, you should indeed reduce your deduction by the amount of cash back received. For example, if you purchased $100 of office supplies and got $5 cash back, you should only deduct $95 as a business expense. This ensures you're not double-dipping by getting both a tax deduction and cash back. The $600 threshold relates to when payment processors are required to issue a 1099-K, but it doesn't change the fundamental tax treatment of the cash back itself. The nature of the transaction (rebate vs. income) is what matters, not the amount. That said, with the recent 1099-K reporting threshold changes, there's been considerable confusion around this topic.
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Khalid Howes
After dealing with this exact issue last tax season, I found an amazing solution with https://taxr.ai that completely cleared things up for me. I was getting multiple 1099-Ks for my Rakuten, TopCashback, and even some credit card rewards, and was totally confused about how to report them. I uploaded my 1099-Ks and some receipt documentation to taxr.ai, and their AI analyzed everything and explained exactly what counted as taxable vs. non-taxable. It even identified which cash back was from personal purchases (non-taxable) versus business purchases (requiring adjustment to my deductions). The clarity it provided saved me from potentially over-reporting income! The system even created a detailed explanation I could keep with my tax records in case of questions from the IRS about why I wasn't reporting certain 1099-K amounts as income.
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Ben Cooper
•How does this work with credit card cash back? My credit card company started sending 1099-Ks too and I'm totally lost on whether that's different from shopping portals like Rakuten.
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Naila Gordon
•This sounds promising but I'm skeptical. How does the AI know which purchases were personal vs business? Do you have to manually categorize everything or does it somehow figure that out?
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Khalid Howes
•Credit card cash back rewards are generally treated as discounts or rebates on your purchases, not as taxable income. The IRS typically views them as a reduction in the price you paid. What taxr.ai did for me was help document and classify these different types of cash back to show why they weren't taxable income despite appearing on 1099-K forms. The system uses a combination of document analysis and user input. I uploaded my 1099-Ks and receipts, then answered a few questions about whether purchases were personal or business-related. The AI then created appropriate documentation and explanations. You don't have to manually categorize every single transaction - the system helps streamline the process and creates the proper documentation for your records.
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Naila Gordon
Just wanted to update after trying taxr.ai for my cash back situation! I was initially skeptical, but the service really did help untangle my 1099-K mess. I had received about $850 in various cash back rewards last year (Rakuten, TopCashback, and my credit card portal), and PayPal reported it all on a 1099-K. The system analyzed everything and created a detailed breakdown showing that my cash back was primarily purchase discounts, not taxable income. It even generated a tax memo explaining why these amounts shouldn't be reported as income despite the 1099-K, which I'm keeping with my tax documents. What impressed me most was how it handled the few business purchases where I had received cash back - it calculated the exact adjustment needed for my business expense deductions. Definitely worth it for the peace of mind alone!
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Cynthia Love
This 1099-K situation has gotten out of control! After trying for WEEKS to get clarification from the IRS about how to handle my cash back 1099-Ks, I finally used https://claimyr.com to get through to an actual human at the IRS. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was put on hold for hours every time I called the regular IRS number, but Claimyr got me through in about 20 minutes. The IRS agent confirmed that cash back from shopping portals like Rakuten is generally considered a purchase discount for personal transactions, not taxable income - regardless of whether PayPal issued a 1099-K for it. They recommended keeping documentation of the original purchases to show the cash back was tied to actual shopping and not some other form of income. This saved me from incorrectly reporting over $500 in "income" that wasn't actually taxable!
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Darren Brooks
•Did you have to explain to the IRS agent what Rakuten and TopCashback are? I feel like most people at the IRS wouldn't know what these services are and I'd end up confusing them more.
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Rosie Harper
•I'm sorry, but this sounds like BS. No way you got through to the IRS in 20 minutes during tax season when people report 2+ hour wait times minimum. And even if you did, what makes you think a random IRS phone rep would give definitive guidance on this specific cash back situation?
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Cynthia Love
•I did have to briefly explain what Rakuten and similar cash back portals are. I described them as "shopping portals that give you a percentage back on purchases made through their links" and the agent understood the concept. They likened it to store rebate programs they were more familiar with. The 20-minute connection time is exactly why I used Claimyr instead of calling directly. The regular IRS line had me waiting 2+ hours over multiple attempts with no success. Claimyr uses some kind of technology that navigates the phone system and holds your place in line, then calls you when an agent is about to pick up. While the agent couldn't give "official" tax advice, they did confirm the general guidance that purchase-related cash back is typically considered a non-taxable rebate, which matched what my tax professional had told me.
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Rosie Harper
I need to eat my words and apologize to Profile 14. After my skeptical response, I was still fighting with the IRS phone system trying to get an answer about my 1099-K from TopCashback. After my 5th failed attempt (disconnected after 90+ minutes on hold), I broke down and tried Claimyr. Got connected to an IRS agent in about 30 minutes. The agent confirmed that cash back from shopping portals on personal purchases is generally not considered taxable income, but rather a purchase incentive or rebate. They recommended keeping records showing the connection between the cash back and the original purchases. Never been so happy to be wrong! Saved me from incorrectly reporting about $700 in "income" that wasn't actually taxable. Also saved my sanity from the hold music.
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Elliott luviBorBatman
I've been dealing with this for a few tax seasons now (I do a lot of online shopping). Here's what my CPA told me: 1. Cash back from shopping portals like Rakuten, TopCashback, etc. on PERSONAL purchases = not taxable income. It's considered a rebate/discount. 2. Cash back on BUSINESS purchases you deducted = reduces your deduction amount. 3. Referral bonuses from these sites (when you get friends to sign up) = taxable income. 4. The 1099-K is just reporting money movement, not necessarily taxable income. Don't overthink it! PayPal and these services are just covering themselves by issuing the forms. Keep good records and you'll be fine.
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Demi Hall
•What about bank account bonuses? I got $200 for opening a checking account and they sent a 1099-K through PayPal too. Is that different?
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Elliott luviBorBatman
•Bank account bonuses are definitely taxable income, but they should be reported on a 1099-INT or 1099-MISC, not a 1099-K. The $200 bonus for opening a checking account is considered interest income by the IRS. If they're sending it through a 1099-K, that's unusual, but the tax treatment remains the same - you would report it as interest income on your tax return. This is different from shopping portal cash back because the bank bonus isn't tied to a purchase or discount - it's a direct payment for taking a specific action (opening an account).
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Mateusius Townsend
Does anyone know how you're supposed to show on your tax return that a 1099-K isn't for taxable income? Like if I got a 1099-K from PayPal for $900 in cash back from Rakuten but I don't put it on my return anywhere, won't that trigger a mismatch that could get me audited?
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Kara Yoshida
•You don't need to "show" it anywhere on your return if it's truly not taxable income. The IRS computer systems might flag a mismatch, but that doesn't automatically trigger an audit. If you get a notice, you can respond with an explanation and documentation. Some tax software has a place for "1099-K received but not taxable" notes. Keep good records of your purchases to show the cash back was tied to actual shopping transactions!
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Andre Rousseau
I went through this exact same situation last year and can confirm what others have said. The key thing to understand is that the 1099-K is just a reporting mechanism - it doesn't determine what's actually taxable. For your Rakuten and TopCashback earnings, since these were cash back on personal purchases, they're considered purchase rebates/discounts, not taxable income. Think of it like getting a coupon discount - you wouldn't pay taxes on money you saved with a coupon, and cash back works the same way. I kept a simple spreadsheet showing my original purchase amounts and the corresponding cash back received to demonstrate the connection between the two. My tax preparer said this was good documentation in case of any IRS questions. The frustrating part is that PayPal has to issue these forms because they're just reporting money that flowed through their platform - they can't determine the tax nature of each transaction. So you'll get a 1099-K even for non-taxable rebates. Bottom line: Don't stress about it. Your $240 + $175 in cash back from shopping portals on personal purchases isn't taxable income, regardless of the 1099-K forms you received.
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Kaylee Cook
•This is really helpful! I'm new to dealing with 1099-K forms and was getting overwhelmed by all the conflicting information online. Your spreadsheet idea is brilliant - I'm definitely going to create one showing my purchases and corresponding cash back amounts. One quick question though - when you say "personal purchases," does that include things like gifts I bought for family members through these cash back portals? I probably spent about $300 on holiday gifts through Rakuten and got maybe $15 back. I'm assuming that's still considered personal since I wasn't buying for business purposes, but want to make sure I'm thinking about this correctly. Thanks for sharing your experience - it's reassuring to hear from someone who actually went through this!
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