Is credit card cash back considered taxable income for my gold coin reselling side hustle?

But I've always heard that credit card rewards aren't taxable! If I buy something for personal use and get cash back, I don't have to report that. How is this different? And do I need to be filing some kind of business tax return now instead of just my regular 1040?

You're right that personal credit card rewards typically aren't taxable - that's because they're considered rebates on your personal spending. The difference here is that you're using those rewards as part of an income-generating activity. For tax purposes, you should report this on Schedule C of your regular 1040 if you're operating as a sole proprietor, which it sounds like you are. You'll report your sales revenue, deduct your costs (adjusted for the cash back), and pay tax on the net profit. You may also need to make quarterly estimated tax payments if you expect to owe $1,000 or more in taxes from this business.

Did you need to submit a lot of documentation? I've got like hundreds of transactions and I'm not the most organized person... wondering if this would work for someone who doesn't have perfect records.

I'm skeptical about these online tax tools. Did they actually give you specific advice for your situation or just general guidelines? Because this cash back situation seems pretty niche.

You don't need perfectly organized records to start with - that's actually one of the things I found helpful. You can upload credit card statements, receipts, or even just spreadsheets of your transactions. The system helps organize everything and identifies the purchases that generated cash back. For your question about specific vs. general advice - it was definitely specific to my situation. I was doing something very similar to the original poster with electronics instead of gold. The tool identified exactly which transactions were business-related, calculated my true cost basis after cash back, and even flagged potential audit risks in how I was categorizing things. It's not just generic advice but actually analyzes your specific situation.

How does this actually work? Seems weird that some service could get me through to the IRS faster than just calling them directly. Do they have some special access or something?

This sounds like BS honestly. I've never heard of a service that can magically get you through to the IRS. They have the same phone numbers as everyone else. Probably just taking your money to put you on hold like everyone else.

The service works by using an automated system that navigates the IRS phone tree and waits on hold for you. When they reach a live agent, you get a call connecting you directly. They don't have special access - they're just using technology to handle the frustrating wait times so you don't have to sit on hold for hours. As for whether it's worth it - all I can share is my experience. I had tried calling the IRS myself multiple times over several days and couldn't get through. With Claimyr, I was connected to an agent in about 35 minutes while I continued working on other things. The information I got directly from the IRS about handling my cash back rewards for my business saved me far more than what the service cost.

What's the threshold for something being considered a business vs a hobby? I do something similar but much smaller scale (maybe $2-3k profit a year). Do I need to worry about all this business stuff too?

There's no specific dollar threshold that automatically makes something a business versus a hobby. The IRS looks at several factors including whether you operate in a businesslike manner, how much time you devote to it, whether you depend on the income, and most importantly, whether you have a profit motive and actually make profits consistently. If you're making $2-3k profit annually and doing it systematically with the intention of making money, the IRS would likely consider it a business activity, especially if you've been profitable for 3+ years. This means you should be filing Schedule C and paying self-employment tax. The good news is you can also deduct legitimate business expenses like mileage for picking up inventory, home office if applicable, and other costs directly related to your activities.

Thanks for the clear explanation. That makes sense about the "primary purpose" being important. So just to make sure I understand - on my Schedule C, I would report my sales revenue of $7350 for those coins, but then list my cost of goods sold as $7200 (the $7500 purchase price minus the $300 cashback), giving me the $150 profit? And one more question - do I need to maintain any special documentation for the cash back portion? My credit card statement shows the rewards but doesn't specifically tie them to individual purchases.

Yes, that's exactly right. You'd report $7350 as revenue and $7200 as your COGS after subtracting the cash back from your purchase price. This properly reflects your economic reality - a $150 profit. For documentation, you should maintain a record that connects the cash back to the specific inventory purchases. Since credit card statements often show rewards as aggregate amounts, I recommend creating a simple spreadsheet that allocates the rewards to specific inventory items based on the purchase amount and reward percentage. Keep copies of all statements showing the rewards earned alongside your purchase receipts. In case of an audit, you want to clearly demonstrate the connection between specific inventory purchases and the related cash back.

You might want to consider filing amended returns if you've been doing this wrong for years. The IRS generally can go back 3 years for audits, but if they suspect substantial underreporting they can go back 6 years or even longer in some cases. Better to correct it yourself than have them find it!

That's really concerning. I wonder if it would trigger an audit if I suddenly start filing differently. The amounts weren't huge - maybe $5-6k in unreported profit over 3 years due to not accounting for the cashback properly. Do you think that's enough to worry about?