Seeking CC help/suggestions - Specific conditions

CC issuers have been updating their terms to specifically exclude cash equivalents from earning rewards. The problem is that they can’t always determine from the transaction that it included cash equivalents. Nor is it their responsibility (at this time anyway) to produce 1099s for any such rewards. AFAIK the 1099s issued in the past were for referral rewards and signup bonuses, not for rewards earned from purchases.

You’re full of potatoes and natural gas. And you know it. And if you don’t know it, then you’re in denial.

“Wrong, these rewards are obviously taxable per United States Tax Court Memo 2021-23.”

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Not at all. We do not agree on what is obvious and what is not.

While other things are probably OK, estimated taxes and property taxes usually cost more than 2%, so you’re not actually profiting from paying them by CC, you’re losing money. However, if your farm is a business, then the basis of your farm expenses should be reduced by the rewards you earned with the credit card before you claim those as business expenses.

What happens here is you spend $100 on seeds, grow $1000 worth of… tomatoes, and claim a $900 profit on your business tax. But your actual profit was $902, because you got $2 back from Citi for your $100 purchase. Your business tax should show a $98 expense and $1000 revenue or $100 expense and $1002 revenue, resulting in $902 profit.

Like I said, what you do is between you and your God and conscience, but the rules are pretty clear.

Surely if they got to that point the CC issuers would be more likely to exclude those purchases from rewards rather than report the rewards as income.

LOL. Do you agree that US T.C. Memo 2021-23 exists and is the law of the land?

Do you agree that the memo states the following:

?

Let’s start there and see where we diverge.

Agreed. I actually posted on that back in 2018. It is already happening in some parts of the world:

In Singapore, Citi reining in cash back for certain MCCs

It is noteworthy, I think, that once again in that example it is one of the “big banks” taking the lead.

Needless to say when it comes to the “big banks”, I’m not a fan. :wink:

Are you a lawyer? I didn’t realize. Or perhaps you are a judge?

Either way, I’m not buying what you’re selling.

If the IRS acts to tax my rewards I will sit up and take notice. Until then:

yawn

:rofl:

It is & I let my accountant take care of the process. Seems to be ok with God & conscience. :sweat_smile:

…and at that point you better have more substantial reasoning than “I dont wanna pay and I dont care about any court ruling”, or the tax levy will be the least of your problems.

Don’t be silly. Are you unfamiliar with plausible deniability?

I have lived for years with “gray areas” of the tax law. Now when the law is clear I pay up; no cheating. But the gray areas are quite another thing. I do my own taxes and I study the tax law, as required, personally and quite extensively.

And given the IRS has ignored this issue entirely for at least the last ten years, I’m confident worst that can happen is they send me a bill. And frankly, absent something concrete out of them in advance at which point I would pay anyway, I do not anticipate even so much as a bill.

Again, just because you don’t report it and they don’t send you a bill, does not mean your profits are tax-free.

Here’s another excerpt form the court’s ruling (one the previous quotes I posted was from the IRS Commissioner’s summary, not the actual ruling):

These people not only bought Visa GCs, but also reloaded debit cards and purchased MOs directly with the Amex CC, so the court had to account for all three types of purchases. It’d be stupid to think that purchases of CDs would be treated differently than purchases of MOs or debit card reloads.

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It was kind-of disputable before, but now the law is clear. Not paying now is cheating. No matter what justifications you tell yourself.

Is when you know you’re a cheat but the IRS can’t prove it :laughing:

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Your accountant is responsible only for filing your taxes correctly using the information you provided. If you didn’t provide something, such as telling them that you earned 2% cash back on your business expenses, then the resulting miscalculation is not their responsibility, it’s yours.

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Not a problem!

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If I didn’t know any better, I would absolutely think @shinobi was a Trumper living in some kind of batsh*t crazy alternate reality. Oh wait… :rofl:

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One more thing.

So I pay all these bills with a credit card. I submit the bills on my income tax & I have a receipt that those bills were paid. How does anyone know I receive a bonus in cash if the credit card company doesn’t send me a 1099 or something. End of story!!

Well, yeah, you’d have to be audited to get caught. But that’s “getting away with it”, not “doing it correctly”.

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How does anyone know that a retail store gets paid CASH for the things they sell? The customers don’t send them a 1099. End of story???

A big part of the tax system relies on the honesty of the taxpayers. It’s not your bank’s responsibility to know that you put business expenses on a personal credit card. It’s your responsibility. Or you can just get a business credit card that only gets business expenses, and any rewards earned will be easier to track and separate from your personal expenses and rewards. I’m just pointing out that what you are doing is not what you are required to do by IRS rules. But what you do with this information is up to you, obviously. Just don’t pretend that what you’re doing is right or legal.

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I have long maintained, right here on this thread, that my CD purchase activity is only a second rate form of MS (manufactured spending). As such, this activity is engaged in by few professional MSers. The reason is simple:

Profits from full strength manufactured spending far exceed my own because I turn my money over much, much more slowly than the pros.

I have never personally engaged in professional MS activity and I do not know how to go about it. In reading some of the references linked above I see it apparently involves purchase of gift cards, money orders, and other such cash equivalent items which can quickly be monetized. Also such purchases generally require, and tie up, far less capital than does my own less aggressive approach to MS.

The point is that, because it is so profitable, full strength MS attracts far more participants than does my own form of the activity. And if the IRS decides to tax certain CC rewards, those folks will be first and foremost in the line of fire. And it’s a LOT of folks. You could hear the angst in their posts, and nobody posting there was buying certificates of deposit.

So it will be interesting to see, going forward, just exactly what the IRS does, if anything. They have taken no interest in this matter for at least ten years. Will that change? Stay tuned. :smiley:

Now on another subject entirely, I find amusing posts here by holier than thou, virtue signalling scolds who spend their lives looking for ways to spend other people’s money. As such, they constantly face the dilemma of running out. You people have me exactly right. I will do what I can to hang onto my own money in order to safeguard it from being wasted by profligate spenders like yourselves. And if that does not comport with your very effete views of how your world should be, do not look to me for solace.

:rofl: :rofl:

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Great points. This was really a case of the age old question - should I assume I’m going to get shut down and just go as big as possible for as long as they let me, or should I try and figure out the right amount to stay under the radar and do it for as long as possible? Turns out, if you got in right at the right time (assuming 2013 was the right time), you could do millions in MS before Amex shut you down, so the “go big” plan was a good one for them. BUT, they went so big, the tax man noticed, so in the long run, it looks like it wasn’t nearly as profitable as they originally thought. Regardless, I have to tip my hat to them for fighting the fight. Maybe this guy wasn’t on a forum, but if he were in contact with some big time MSers, it may have made sense for them to pool their resources to get him the best legal representation in the land because this is clearly a giant blow to their hustle.

I think what I am most curious about was how this family was able to do that sort of volume. How many hours a day did they spend on this? Did his much higher than average intelligence level help him figure out some sort of method to churn through this much money faster than most? Or was it more old fashioned social engineering and getting to know the clerks and shifts at your local stores that were the best to work with? Or some mix of the two?

I’m also curious to know how the IRS caught them. I wonder if it was a whistleblower at their bank.

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