cancel
Showing results for 
Search instead for 
Did you mean: 
Not applicable

How to record credit card Cash Rewards in QuickBooks Online? I currently also receive cash back Rewards from my Paypal checking debit card.

 
Solved
Best answer 10-15-2018

Accepted Solutions
Established Community Backer ***

@ aida Create a new income account, type = other income d...

@ aida

Create a new income account, type = other income

detail type = Other misc income

upper right name it cash back rewards

You only book to the account when you use or receive the cash back rewards, not as you earn them.

33 Comments
Established Community Backer ***

@ aida Create a new income account, type = other income d...

@ aida

Create a new income account, type = other income

detail type = Other misc income

upper right name it cash back rewards

You only book to the account when you use or receive the cash back rewards, not as you earn them.

Moderator

Hi Aida, We can record the cash back rewards as Credit Ca...

Hi Aida,

We can record the cash back rewards as Credit Card Credit. Some entrepreneurs use Other Income as the affected account. Though, you can create an income account specifically for cash back rewards.

Let's create an income account. (Optional)

  1. On the left-panel menu, click Accounting and go the Chart of Accounts tab.
  2. Click the New button, and select Income in the Account Type field.
  3. Choose the Detail Type. You can refer to your accountant if you're unsure of what to choose.
  4. Enter your desired account name in the Name field, and click Save and Close.

Now, let's create a Credit Card Credit for cash back rewards.

  1. At the top, click the Create menu (+) and select Credit Card Credit.
  2. Choose a payee and enter the correct Credit Card Account.
  3. Go to the Account details section.
  4. Enter Other Income or the income account you created under the ACCOUNT column.
  5. Enter the cash back amount.
  6. Click Save and close.

You can also reach out to your accountant to ensure that this will be the best process for you.

Feel free to visit the Community again if you have other concerns. We're here to help.

Established Community Backer ***

A reward received is NOT something given, an income accou...

A reward received is NOT something given, an income account to track rewards given lowers income
Highlighted
Community Contributor **

Re: @ aida Create a new income account, type = other income d...

What if you are just using the points for something and you aren't getting a credit on the bill.  Do you need to account for using those?  If so, how?

Super Contributor **

Re: A reward received is NOT something given, an income accou...

@Rustler
Is Cashback Rewards a fully-taxable income?
Or is it treated as capital gain?
Does it matter how it is redeemed - Check, Credit to the account balance, etc?

Established Community Backer ***

Re: A reward received is NOT something given, an income accou...


@EBFinancials wrote:

@Rustler
Is Cashback Rewards a fully-taxable income?
Or is it treated as capital gain?
Does it matter how it is redeemed - Check, Credit to the account balance, etc?


A cash back reward is income when received, typically posted to other income

 

no it does not matter how you use it.  it buy a hoogalator on a bill

hoogalator, qty 4, $23 ea, total $92

other income, -$40

total due $52

Super Contributor **

Re: A reward received is NOT something given, an income accou...

@Rustler
Can you please explain what hoogalator on a bill means:

 

Not applicable

Re: @ aida Create a new income account, type = other income d...

The problem is when my bank doing online download, the transaction is recorded as "transfer" and therefore I could not select "Income" type account for the transaction.

Established Community Backer ***

Re: @ aida Create a new income account, type = other income d...


@i12know wrote:

The problem is when my bank doing online download, the transaction is recorded as "transfer" and therefore I could not select "Income" type account for the transaction.


And there in is the problem allowing the bank to make your entries for you, causes problems, this is just one of them

 

the work flow has always been, enter transactions, download banking, match

 

but the advertising makes download banking sound like utopia

Not applicable

Re: @ aida Create a new income account, type = other income d...

I finally fixed the problem by:

1) Create a new "Credit Card Credit" entry for the Register of that Credit Card with the same amount and set the appropriate Chart of Account (I use cashback reward to offset bank's charges)
2) Unmatch the "Transfer" from the online banking download
3) Delete the "Transfer"
4) Match the entry with the new CC-credit transaction I just created.
Super Contributor **

Re: A reward received is NOT something given, an income accou...

@Rustler
How come it lowers income, logic tells it increases it?

Established Community Backer ***

Re: A reward received is NOT something given, an income accou...


@EBFinancials wrote:

@Rustler
How come it lowers income, logic tells it increases it?


the -40 I showed for income on the example of the bill, is telling QB to post a credit to income, a credit to income does increase income.

 

A bill posts a debit to all accounts listed by default, so the negative sign changes that to the opposite - a credit

Super Contributor **

Re: A reward received is NOT something given, an income accou...

@Rustler
So the -40 is the cashback portion of the transaction?
And the $52 is due since it is not in Accounts Payable?

Super Contributor **

Re: A reward received is NOT something given, an income accou...

@Rustler
In your bill example the two accounts impacted are:
Other income (Assets) - Increased by $40
Accounts Payable (Liabilities) - Increased by $52
There is no balance then at the two sides of the equation, please explain.

Established Community Backer ***

Re: A reward received is NOT something given, an income accou...

it is a check, the total charge is 92

I subtract 40, cash back rewards, and post to income

the balance is 52 and I pay it

Super Contributor **

Re: A reward received is NOT something given, an income accou...

@Rustler
So in terms of balancing the transaction it goes like:
Accounts Payable increased by $92
Other Income increased by $40
Payment account increased by $52
I understand the workflow you described in terms of the check/bill, however, I still don't understand what accounts are impacted and how the various numbers are posted in them

QuickBooks Team

Re: How to record credit card Cash Rewards in QuickBooks Online? I currently also receive cash ba...

Hello there, @EBFinancials.

 

I'm here to share some information on how the  credit card Cash Rewards affects your transactions flows.

 

@Rustler is correct! In addition, when you create a bill or any expense transaction with the amount of $92, it will increased your Accounts Payables or expense account. Once you record a payment for $52, it will be posted to the Deposit To account you selected.

 

I'd recommend reaching out to your accountant to help you decide on the best route to take in recording the credit card Cash Rewards you've received and choosing the accounts impacted.

 

Fill me in if you have other questions about recording your transactions. I’m always here to help.

Established Community Backer ***

Re: How to record credit card Cash Rewards in QuickBooks Online? I currently also receive cash ba...


@juVielL wrote:

@Rustler is correct!Once you record a payment for $52, it will be posted to the Deposit To account you selected.


What part of write a check, make a payment, do you think means you deposit the money???

 

Super Contributor **

Re: How to record credit card Cash Rewards in QuickBooks Online? I currently also receive cash ba...

@Rustler

You are saying that the payment should be recorded/posted into Deposit To account only when it is actually paid, rather than when the bill/check is generated?

Established Community Backer ***

Re: How to record credit card Cash Rewards in QuickBooks Online? I currently also receive cash ba...

 

you do not track rewards as you accumulate them

 

you use them against a purchase, that is when they become income as I showed

 

enter a bill to be paid later, use the rewards

write a check for an over the counter purchase, use the rewards on the check in QB

Not applicable

Re: @ aida Create a new income account, type = other income d...

why are you paying tax on it? It should be an expense account?

Not applicable

Re: @ aida Create a new income account, type = other income d...

I have been following this thread and I disagree with how you folks are accounting for a credit card cash-back reward. If this is based on spending (as opposed to a referral benefit or for opening a new card), then the cash back is actually a rebate or discount on your expenses. It is NOT taxable income and so should not be an income account. Instead its a negative expense.

 

At the moment I have it as a miscellaneous expense and then my P&L shows a negative miscellaneous expense under "other expenses". I'm not sure if this is right, but I know its not company revenue or income.

Not applicable

Re: @ aida Create a new income account, type = other income d...

Hi all. DavidH2 is correct. Cash back rewards that are based on purchases should be counted as discounts/adjustments to the purchase price - not as income. The IRS has addressed this exact question and is very clear about it:

 

"A rebate received by a buyer from the party to whom the buyer directly or indirectly paid
the purchase price for an item is an adjustment in purchase price, not an accession to
wealth, and is not includible in the buyer’s gross income."

 

If your purchases are business expenses that are fully deductible, then in most cases it won't impact your tax liability. For example: $100 expense with a $5 cash back reward will still result in -$95 net income whether you record it as $5 income / $100 expense or $0 income / $95 expense. However, the correct way to record cash back rewards is a contra-expense. Booking it as income artificially inflates your income statement.

 

If, however, you receive a cash bonus or reward that is not linked to purchases, e.g., an unconditional sign-up bonus, you should report that as miscellaneous income. You may even receive a 1099-MISC from the bank or institution that gave you the rebate in that case.

 

Thanks,

Joe

LIJ
Not applicable

Re: @ aida Create a new income account, type = other income d...

So I'm still not clear how I enter a contra expense. I tried entering an expense as a negative but it wouldn't take that. I'm trying to enter cash back rewards used on a credit card.

Need to get in touch?

Contact us