Is Credit Card Rewards Cash Redemption a Tax Event? Do I need to report $1,200 cashback as income?

Wait I'm confused. I got like $600 from a sign up bonus for opening a new credit card this year. Are you saying I need to report that? I didn't have to spend anything to get it, they just gave it to me for opening the account.

Sign-up bonuses that don't require any spending (sometimes called "thank you points" or account-opening bonuses) may indeed be considered taxable income, and you might receive a 1099-MISC if it's $600 or more. In your case with business expenses, since you mentioned the rewards are from business spending, you should consider whether you've deducted those expenses already. If you spent $10,000 on business expenses, deducted that full amount, and then received $1,200 back as rewards, you've effectively only spent $8,800. Some tax professionals would recommend either reducing your expense deduction or including the rewards as income to accurately reflect your true business costs.

How does taxr.ai handle business credit card rewards specifically? I use my card exclusively for my LLC expenses, but I redeem the points for personal travel. Does the tool distinguish between business and personal use when determining taxability?

Sounds interesting but does it actually connect with the IRS systems to verify this information? I'm worried about using some random tax tool I found online and then getting audited because it gave wrong advice.

For business credit cards, the tool specifically flags rewards from business expenses and explains the potential tax implications. It can identify when rewards earned from deducted business expenses might need to be reported as income or used to reduce your expense deductions. The analysis shows you exactly which transactions generated the rewards so you can make accurate adjustments. As for connecting with IRS systems, taxr.ai doesn't directly connect to the IRS, but it uses the same tax rules and regulations that tax professionals follow. It's more about analyzing your specific situation and documents rather than filing anything. The analysis includes references to relevant IRS publications and tax court cases so you can verify the information yourself.

How does this Claimyr thing actually work? Do they just call the IRS for you or what? I don't understand how they get through when nobody else can.

Yeah right. Nothing gets you through to the IRS faster. They probably just put you on hold like everyone else and charge you for the privilege. The IRS is impossible to reach, that's just how it is.

They don't call the IRS for you - they use technology to navigate the IRS phone system and hold your place in line. When they reach a real person, the system calls you and connects you directly to the IRS agent. It's your own conversation with the IRS, Claimyr just handles the waiting part. And to the skeptic - I totally get it, I thought it was BS too. But it actually works. The system keeps redialing and navigating the phone tree until it gets through. I talked directly with an IRS agent who answered my question about credit card rewards taxation. No one's claiming it's instant - it took around 35 minutes for me - but that beats spending all day trying to get through myself.

What about if i got rewards from regular spending but then converted them to cash instead of using them for travel or statement credits? Does the form of redemption change anything?

How you redeem the rewards doesn't generally change the tax treatment. Whether you get cash back, statement credits, gift cards, or travel miles, the IRS is more concerned with how you earned the rewards rather than how you redeem them. If you earned the rewards through regular spending, they're typically considered rebates regardless of how you choose to redeem them. It's the earning method (normal purchases vs. sign-up bonuses without spending) and the context (business vs. personal) that matters more for tax purposes.

I got a 1099-MISC one year when i received a $750 checking account bonus from my bank. They specifically told me it was taxable when i signed up. But never got anything for regular credit card rewards tho.