I just found out that a theater gig I recently finished - which I thought was a 100% volunteer labor of love - actually will pay me a little money. Bully for me!
I’m wondering if I need to declare this on my taxes for 2018. I’m not sure how much money we’re talking about here, but it can’t be more than a little; I’ll be surprised if it’s more than $100. I’ve spent that on costuming and supplies, so my inclination is to just leave this off my next return. I don’t itemize, so offsetting the income with expenses isn’t an option. I didn’t file a W4, so I doubt there’s any IRS trail linking me with the money for income purposes.
What do you think? Am I in the clear if I just forget about this next tax time?
Congratulations, you are the sole proprietor of a business. You file a schedule C with your taxes. This might actually help you out if you can claim more in losses (receipts) than you gained in income.
If you receive less than $600 in a year from any one payer, they will not issue you a 1099, so the government will never know about. That doesn’t mean you shouldn’t report it though. Income is income, from whatever source derived.
If you had a profit motive in pursuing this activity, then you would be able to deduct the expenses on Schedule C. But since you weren’t expecting to be paid, you’d have to itemize the expenses as a hobby deduction, limited to the hobby income.
Thus, if you were to follow the law precisely, you would report the income and not get credit for the expenses since you’re not itemizing. My advice to you is to follow the law, but I will also state there are plenty of people who are either going to not report the income because they were not issued a 1099, or report it on Schedule C and deduct their expenses, perhaps even leading to a loss. I don’t suggest you do either of those things, but the likelihood that the IRS would come after you for the few dollars you would owe them would be very very remote. Since all penalties are percentages of the tax owed, it wouldn’t even get all that out of hand if they somehow did randomly decide to audit you, find out that this money you received was a genuine source of income, determine that you didn’t do it for the money so that you can’t deduct your expenses without itemizing, and were willing to go through with the process of serving you a notice of deficiency for something less than $100.
Don’t report the income until the year you actually receive it though, which means next tax season at the soonest. Perhaps in that time you’ll decide you want to do it more often because you’ll be getting paid and can reuse some of the things you bought to keep expenses down, and can justifiably file a Schedule C.
Hmm. Taxpayers could, theoretically, break the IRS by buyring them under trivial claims. What if everybody filed a separate supplementary form every time they found a nickel in the parking lot?
I think any income of less than $100 would just about fall into the category of a trivial claim, in that it requires data input and/or attention by a wage-paid IRS employee, with little chance that any tax revenue to be derived from it would more than offset the cost of collection.
As a taxpayer who supports the operations of the IRS, I would thank you to keep the hundred bucks and shut up.
That’s almost certainly what I’ll do. The check has been cut, but there will probably be no form. This group doesn’t have my SSN - if it weren’t for Facebook, they wouldn’t even know my last name. I’m still a little shocked that there’s any money at all coming out of this; I’d think it would be more hassle for the folks handling things than it’s worth. But that’s not my problem.
Years ago, I received fifty bucks as an honorarium for delivering a speech. There was a line in the tax return for “miscellaneous income” so I used that to report it. I also ran the numbers without reporting it. It didn’t make a difference, because, as I understand it, the amounts due cover ranges and this didn’t move me to a different range.
Fifty Bucks should have moved you out of your spot in the tax table up to the next one, although perhaps at some other time they were spaced by hundreds far enough up. The current ones (https://www.irs.gov/pub/irs-pdf/i1040tt.pdf) are spaced in $25 increments up to $3000 and then $50 until you get to $100,000 when they tell you to actually calculate it yourself instead of just looking it up on the table.
Actually it’s not clear to me this is anything other than a reimbursement of your expenses. I realize it doesn’t match exactly and you didn’t turn in receipts, but I’d still think you can interpret it that way;.
Uh oh … sorry to say, the IRS don’t give a rat’s ass your motivation … if you had profit, you gotta pay taxes …
I’m just looking at the charts starting on page 7 of the IRS Instructions to the Form 1040 … you’ll have to apply your own numbers but somewhere there’s a minimum income when you have to file … go through all the charts and use that which applies …
The specific chart that applies in the OP’s case is Chart C, line 3 = “You had net earnings from self-employment of at least $400.” … remember, that’s ALL self-employment income for the whole year … you’d have to fill out a separate Schedule C for each and every business activity for which you received revenue from … if your profit is over $400, you have to pay 15% self-employment tax on that profit … hahaha … that’s in addition to your income taxes … ROFL … this is called “sticking it to the middle class” … what a great country this is … get yourself busy and pay my fair share of the tax load, will’ya …
The theater paid you less than $600, so they do not have to report this to the IRS on a Form 1099 … however, they can report it as an expense on their schedule C (or whichever form they use to report their own revenues on) … labor costs are a legitimate business expense and they don’t have to pay taxes themselves on that money, you do … so the IRS will be notified, whether they catch it among the hundreds of millions of pages they’ll receive is another question …
In a nut shell: In the case where all your other income is reported on a W-2, then the $100 cash you received doesn’t have to be reported … once we start adding other forms of income, things get real complicated real quick … read the 1040 instructions and if something in your particular tax position doesn’t make sense, consult a tax professional …
Note that the earnings reported on Sch C’s (and then Sch SE) is credited to your personal Social Security account … remember that 7.5% of your W-2 wages are withheld for SS tax, AND your employer matches that amount for a total payment of 15% … so for self-employed people, they have to pay the entire 15% … evading these taxes is not only illegal, but it will leave you with a tiny SS retirement check when you’re too old to work … not a pretty sight …
It reminds me of the time I gave a talk at CUNY. They were going to pay me $100. When the check came they had discounted it by $30, God only knows why. Then they “took” me to dinner except I had to pay my $40 share. Then (it was a cold and rainy night) I took a taxi to my daughter’s in Brooklyn where I was staying and that cost me $35. I never mentioned that “income” on my tax return.
You can get a 1099 for less than $600. They just don’t HAVE to send one. My business partner did a freelance thing for a couple hours for a big company last year for a couple hundred bucks and they sent him one.
Business expenses have nothing to do with personal deductions/itemization. If your business expenses offset your business income you claim it and end up with your profit or loss.
This is absolutely not true. To take a loss due to any activity, you have to have intended to make a profit. So they definitely do care if you try to claim a loss.
This is absolutely true, but not relevant. The OP did not make a profit on the activity. They were pursuing a hobby and got paid a little money, but less than they spent. The rules for deducting hobby (activities not pursued for profit) are that they cannot exceed hobby income (you can’t take a loss on a hobby) and that they must be itemized deduction. A Google search you do on hobby expenses will tell you this very easily. Here’s is the first result: https://www.bankrate.com/finance/taxes/tax-breaks-turn-hobby-into-business.aspx
What this means is that the income is taxable and the deductions against the income are not available. What the OP should really do is provide a list of expenses, preferably with receipts, to the organization, and have the organization provide you with reimbursement for those expenses. If they do this according to an qualified reimbursement program, than the income is not taxable and is seen as a reimbursement. But if they do not require you to offer evidence of your costs and they might conceivably pay you more than you spent, the plan does not qualify.
