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

Forum|Forum|7 years ago
October 16, 2018
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QuickBooks Online

Best answer by Rustler

@ 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.

RustlerAnswer

@ 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.

B

booksbyschmidt

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?

J

JamesDuanT

Hi Aida,

Some entrepreneurs use Other Income as the tracking account. Though, you can create an income account specifically for cash back rewards.

Let's create an income account. (Optional)

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

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

You can also get one-on-one help for your business:
Check out QuickBooks Live.

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

Rustler

A reward received is NOT something given, an income account to track rewards given lowers income

E

EBFinancials

@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?

IamjuViel

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.

Rustler

@IamjuViel 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???

E

EBFinancials

@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?

B

BeTheDance

Why isn't a cashback reward a contra account for Interest Expense rather than an income account? I do not view these so-called rewards as income. Can someone explain that to me?

C

Charies_M

Hello there, BeTheDance.

Thanks for joining this thread.

As mentioned by my colleague, the accounts you selected for cash back depends on your industry type and what it is for.

Since there are different options to record cash back in QuickBooks Online (QBO), it would be best to seek advice from your accountant regarding this matter. They'll be able to provide a more detailed information about handling cash back.

If there's anything I can help you with, please leave me a reply below. I'm always here to help.

B

BeTheDance

Thanks. So, I just did a little more digging, and I read this is as for virtually all normal use cases that Cash Back rewards are a contra-expense and not an income account:

"

Most credit card companies offer some form of reward program to market their card and build customer loyalty. Rewards come in a variety of forms including cash-back bonuses, gift cards or other merchandise, or airline frequent flier miles.

The Internal Revenue Service (IRS) has fairly clear guidelines about the taxability of reward programs as they pertain to personal use of credit cards. Rewards earned by making credit card purchases are considered by the IRS to be a form of rebate or a reduction in the price of the purchases made with the credit card. That’s great news for those saving their frequent flier miles for that family vacation, the new computer or gift card. These types of earned rewards are not taxable.

However, there are some situations where the IRS could view cash-back rewards, gift cards and merchandise reward programs as taxable income. Some banks and credit cards offer reward miles or points as an incentive or “sign-up bonus” for opening an account. If making a purchase is not required in order to use the points, then the points are generally considered to be taxable income. The point value is determined by the credit card company and should be contained somewhere in the fine print of the reward literature. If the value of those points exceeds $600, then the credit card company would be required to report that income to the IRS and will send those customers 1099-MISC forms.

If an employee uses his personal credit card to for a business related purchase and is subsequently reimbursed for that purchase by his employer, the IRS could consider the related cash-back reward to be taxable income. Likewise, if a business receives cash-back rewards or gift cards, then it should reduce the business deduction of the items purchased with the rewards credit card. If the rewards are earned by an employee of the business through the use of a corporate credit card, then the IRS would consider the value of the cash or gift cards to be taxable income to the employee.

In these situations, the employee should track the amount of gift cards and cash that they received during the year and report that amount on Line 21 of Form 1040 as other income."

S

Shannsocal

Now that I have the points coming in as Cash Back Rewards, how do I create an expense paid for with my Cash Back Rewards it only allows me to pick a CC or Bank for expense so how am I tying the expense to the Cash Back Rewards (other income) I created?

M

Maybelle_S

Hello there, @Shannsocal.

Once you receive a cashback for the purchases made on your credit card, you'll have to record it in QuickBooks. We can use the Credit card credit option by clicking the +New icon in QuickBooks.

Here's how:

Go to the +New button.
Under Vendors, select Credit card credit.
Find the appropriate account from the Bank/Credit Account drop-down arrow.
Under the Category details, select the account that you have for your cashback rewards.
Enter the other needed information.
Select Save and close.

Once done, you can start matching the Transfer with the credit. You can check this link for the steps: Categorize and match online bank transactions. It contains detailed information to match the amount deposited to your bank.

You can read through this article to learn more about managing your downloaded bank transactions: Setup bank rules to categorize online banking transactions in QuickBooks Online.

Fill me in if you have other questions about recording transactions. I'm always here to help. Take care!

B

BookkeeperWytch

Example, we just got a Capital One Rewards check for $59.17...

In QuickBooks under Banking....

Make Deposits/Rec'd From: Capital One/From Acct.: Cash Back Rewards/Other Income/59.17

(Because it is Other Income...not a credit per se)

Bam, you're done.

T

TammieV

I think the issue that most confuses people (or at least me) is when the bank credits your credit card with the cash back reward. The solution you pose is good except from everything I've read, a rebate is not income. So that puts us back at how to code it so that it is not considered income.

G

G I G Trucking Inc

Did you ever get an answer on how to fix/set this up properly? My cash back rewards are applied as a credit to my credit card. I don't know how to set this up so that I'm not taxed on it as income.

B

bruehoyt

This would be income-is. It definitely goers in the plus column.

Whatever it is you charged on the card or account would have been treated as a business expense.

The charge is in the minus column.

The cash back lowers that expense.

So while it is not "income", it reduces the business expense that previously reduced your income.

The charged item was a deduction minus the cash back.

A way to possibly avoid this is to use "points" or credit towards something else rather than cash or credit.

K

katarina2

Hi,

I saw the suggestions below as to how to record a cashback from credit card, However, when I am to create my account I don't have the option to choose "miscellaneous income" as a detail type. I only have the following options:

discounts income

non profit income

other primary income

sales of product income

service/fee income

unapplied cash payments.

Can you help me out?

Thanks

Katarina

A

AileneA

Hello, katarina2.

When a browser's cache storage is full or corrupted, it can cause error messages or not loading on certain webpages in QuickBooks Online. Let's rule this out by using an incognito or private browser:

Here's how:

For Google Chrome browser: Ctrl + Shift + N
For Mozilla Firefox browser: Ctrl + Shift + P
For Safari browser: Command + Option + P

If it works, go back to your regular browser and clear the cache to delete those temporarily stored files and browsing history. The overtime collection of data can create corruption, however, removing this should fix the issue. You can also use other supported, up-to-date browsers to roll out the possibility of a browser-related issue.

Our doors are always open to help you again if you have any other concerns or follow-up questions in QuickBooks. Have a great day ahead and stay safe!

rccmanager

@arkvalleyinfo I grew tired of the back and forth of who was correct in what they would do so I stopped reading before the third page of replies : /

Here's how I handle it. The business earns points for purchases on their Chase business card and can redeem for cash statement credits and even for certain purchases like shipping, internet, cable, and phone charges. I'm not sure if they run promotions on what charges can have the points apply directly to them, but when you do use that option, you can get a boost like 25% less points are needed to pay it off.

I create a credit card credit transaction and credit back the accounts I applied the points to(ie: USPS, FedEx, and Stamps.com credited postage expense, the calendar I bought credited office supplies, and our phone provider credited our phone expense).

We consider it a reduction of those expenses since we had to spend there to earn the points to use there. The direct point redemption to cash applied to the statement may not be what should be done, but I credit back the Owner's draw account. We can choose to receive a check from Chase or a statement credit so I figured this way was easier than waiting for a check in the mail that the owner may put in his account anyway. The card was obtained based off his financial backing after all so he should reap some benefits!

Just my two cents.

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