Are gift cards from rewards sites taxable as income?

[slduffy5]

I am a member of several rewards websites, such as Swagbucks, GiftHulk and MyPoints. As a member of the sites I earn points for performing activities such as searching the web, watching videos, using coupons, reading emails, completing surveys, and more. I am rewarded with points for completing these activities and can redeem the points for gift cards to Amazon, restaurants, stores, and more. Are the gift cards redeemed on these sites taxable as income?"

[MartinW · Accepted solution]

Hi slduffy5,

The Supreme Court defines income as "undeniable accessions to wealth, clearly realized, and over which the taxpayers have complete dominion."

http://supreme.justia.com/cases/federal/us/348/426/case.html

Your gift cards sound like they fit into this description of income.

If you have income, then you have business expenses as well. The cost of your computer, internet, electric bill, home office, and more can be considered business expenses.

http://www.irs.gov/publications/p535/index.html

Since you did not receive any tax documents, the IRS is not expecting you to report any income from this. Once you do the math and deduct your expenses, you might have a loss.

Personally, I would not bother reporting this unless this is how you earn a living. The IRS is not expecting you to report gross receipts and you probably don't have income once the expenses are considered. I would not report a loss because the IRS is likely to disallow this as a hobby loss.

I hope this resolves your question. If you need further help with this issue, please respond to this post.

Thank you for choosing TurboTax!

[springheeledjack]

I received approx 600 in Amazon gift cards on a survey site and was just informed I would receive a form 1099Misc. Will I have to pay tax on this amount? I also receive SSI disability income and am now concerned. I really never thought about it, as is not cash, just used to supplement needs such as clothing, vitamins, etc. What can you deduct and what forms would be required?

[bluedeb]

@springheeledjack You are commenting on a 2 year old post.  Please start your own question so someone can help you.

[MartinW]

Hi slduffy5,

The value of the gift cards are taxable income.

Please report this under this here:

Federal taxes - Wages & income - I'll choose what I work on - Less common income - Misc income 1099-A 1099-C

If your screen looks different than mine, it may be because you are using a different version of TurboTax than I am.

Gift certificates

Cash or cash equivalent items provided by the employer are never excludable from income. An exception applies for occasional meal money or transportation fare to allow an employee to work beyond normal hours. Gift certificates that are redeemable for general merchandise or have a cash equivalent value are not de minimis benefits and are taxable.

I’ve included a link to the IRS website for your reference:

http://www.irs.gov/Government-Entities/Federal,-State-&-Local-Governments/De-Minimis-Fringe-Benefits

I hope this resolves your question. If you need further help with this issue, please respond to this post.

Thank you for choosing TurboTax!

[slduffy5]

According to the link you provided:

"How are de minimis fringe benefits reported?

If the benefits qualify for exclusion, no reporting is necessary. If they are taxable, they should be included in wages on Form W-2 and subject to income tax withholding. If the employees are covered for social security and Medicare, the value of the benefits are also subject to withholding for these taxes. You may optionally report any information in box 14 of Form W-2."

The way I understand this is that if these rewards are de minimis fringe benefits and are taxable then Swagbucks, MyPoints, etc, should be withholding taxes and providing a Form W-2, but they don't. They don't even provide a Form 1099-Misc.

I'm not an employee of these websites. I'm a member of these sites, and in fact on some of the sites I could pay them to have a preferred level of membership where I could earn points at a quicker pace.

I still can't find anything in the IRS publications that says that these rewards are taxable.