Declaring cashback points for purchases and paid surveys...

[nathstaxes]

Hi!

I earned reward points for purchases and taking surveys from MyPoints.com, which I redeemed

for $200 in 2021 sent to my Paypal.

I understand that cashback/rewards for PURCHASES do NOT have to be declared as income, since

they're viewed as a form of discount by the IRS. However, I understand that paid surveys DO have

to be reported as income.

The complication are:

1. The points get lumped together (I don't get Paypal $ separately just for purchase points and then a separate payout for survey points). 

2.  I earned these points over the last 3 years and EARNING the points means having them accrue in my MyPoints account - but they don't actually get converted into income until I manually request a PAYOUT.

I've earned a total of about $375 from purchases and $133 from surveys. I got a payout of $100 last year

(which I didn't declare as income) and a payout of $200 this year.

Since my total payouts = $300 and my total points from purchases = $375, can I just treat the payouts so far as having been solely earned from purchases and not surveys? Then, in 2022, I could treat any payouts as being earned solely from surveys and declare them as income on my 2022 return?

Or, is that not allowed because some of the survey earnings came in 2019 - 2021? However, remember I don't actually convert points accrued into payouts until much later. If it's not allowed, should I figure out the percentage of points from surveys and just declare that portion of the $200 as income in 2021?

Sorry for such a convoluted problem - I hope that someone knowledgeable can help! 

[Cynthiad66]

Well, I would say that the amounts are deminimus and could be excluded.  However, the correct way to report the income is to report the income earned in 2021 on 2021 tax return.  The law is that you are expected to report all your income, even if not reported on a 1099.

Yes figure out the percentage of earned income to repot as 'Other Income" unless you consider this a business.

If you consider the surveys as a business, then you should complete a Schedule C for business income and expenses.

[nathstaxes]

Thank you so much for your quick reply!

Wouldn't points earned/accrued in 2020 but not REDEEMED for cash until 2021

be considered income for 2021?

I was going to categorize survey taking as business income (schedule C), since I intended to

make a profit with this activity.

[LeonardS]

Yes, you will report the points in the year you redeemed them.  Points redeemed in 2021 will be reported in 2021

@nathstaxes