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Level 1

How do I record credit card cash back rewards that DO NOT reduce the balance due on the account? Have set up an "other income account" - what's the offsetting entry?

Entering the reward amount as a refund or credit through the credit card menu reduces the amount due but that's not how this card works.  The point values accumulate until the cardholder decides to use them, not automatically.
Solved
Best answer 12-10-2018

Accepted Solutions
Level 15

you do not track the points until you use them, then they...

you do not track the points until you use them, then they are income to the business

either they are applied as a cc credit reducing the balance
or
you get a check which you deposit and use an income account as the source (from) account for the deposit

I create an income account called rewards income, but it is up to you

View solution in original post

15 Comments
Level 15

you do not track the points until you use them, then they...

you do not track the points until you use them, then they are income to the business

either they are applied as a cc credit reducing the balance
or
you get a check which you deposit and use an income account as the source (from) account for the deposit

I create an income account called rewards income, but it is up to you

View solution in original post

Level 1

Thank you!  That makes sense.

Thank you!  That makes sense.
Level 15

You're Welcome

You're Welcome
Level 1

I read that cash back income is non-taxable (treated as a...

I read that cash back income is non-taxable (treated as a rebate rather than income). Is that the case? If so, could we use tax-exempt interest as the detail type? If it's listed under "Other Income", isn't it taxable?
Level 15

Technically a cash back reward is a reduction of expense,...

Technically a cash back reward is a reduction of expense, but since cash back accumulates slowly over time, and there is no real way to know what points are for what expense, it gets recorded as income.

Personal cash back is not taxable income
Level 1

Re: you do not track the points until you use them, then they...

What is the entry for the points deposit and then applying it to the Visa balance?

Thank you

Level 2

Re: Technically a cash back reward is a reduction of expense,...

What if you redeem the points and receive gift cards?  Do you have to account for this?

Level 2

Re: you do not track the points until you use them, then they...

What if you use the points to get gift cards?  How do you account for it?

Level 1

Re: you do not track the points until you use them, then they...

Hi Rustler,

 

Question for ya............. When I enter reward redemption as a credit back on the card, with the credit card being the purchased from, it automatically creates an entry to offset it against, for reconciliation purposes (I assume).  If reward used during same statement cycle, it works out.  However, I have a purchase and the reward points on different cycles.  Now what do I do? Thank you in advance.

Anonymous
Not applicable

Re: you do not track the points until you use them, then they...

How do you record this in QB's online if the owner receives a check for the rewards and cashes the check?

Level 3

Re: you do not track the points until you use them, then they...

Here is how I would do it:

Make a Journal Entry

Debit - Owner Equity Distribution account

Credit - An Expense account (I would use either Bank Charges, or Cost of Goods Sold)

or whatever expense is applicable

Anonymous
Not applicable

Re: you do not track the points until you use them, then they...

Thank you!  I appreciate you outlining the specific entries.    

Level 2

Re: you do not track the points until you use them, then they...

What if you use the rewards to purchase business travel airline tickets?

Level 1

Re: Technically a cash back reward is a reduction of expense,...

Actually the IRS does NOT consider cash

The IRS’s position is that these transaction-related benefits are “rebates” or “discounts,” not taxable income. The IRS first came to this conclusion in a 2002 memorandum and later confirmed this reasoning in a 2010 memorandum.

Here’s what the IRS had to say in the later memo:

“Taxpayers will make purchases with the credit cards, and as a result of those purchases, will  be entitled to receive rebates…. The portion of the credit card purchases that taxpayers can… receive back in cash… does not constitute gross income to taxpayers.”

rewards as income:

 

 

Level 2

Re: Technically a cash back reward is a reduction of expense,...

Yes, what I've read indicates the points are non-taxable. Specifically, points earned for purchase transactions are not taxable, but points earned as sign-on or account-opening bonuses are taxable. So here's my question: if I redeem points on the business credit card and deposit, say, $2000 into the business checking account, how do I record that deposit so that it does not increase taxable income?

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