Just want to add one thing I learned the hard way - if you don't report this income and the family DOES decide to claim you as a childcare expense on their taxes (which they might do despite what they told you), it creates a mismatch that can trigger IRS questions. This happened to me a few years ago. The family told me they weren't reporting, then claimed childcare expenses, and I got a notice from the IRS asking about the unreported income. Not a full audit, but definitely a headache to resolve.

Based on everyone's advice here, it sounds like you definitely need to report this income. I'm in a similar boat - made about $2400 babysitting for three different families this year and was getting mixed messages about whether it counted as "real" income. What helped me was tracking down the actual IRS publication (Pub 926) about household employees. It's pretty clear that if you're providing childcare services regularly, you're either a household employee (if they control your work) or self-employed (if you control how you do the work). Either way, it's taxable income over $400. The "gift" explanation from the mom is unfortunately just wrong, even if she genuinely believes it. The IRS looks at the substance of the transaction - you provided services, you got paid. That's income, not a gift. One thing I'd add to the great advice about expenses - if you used your phone for coordinating with the family or took any training courses related to childcare, those can be business expenses too. Every legitimate deduction helps offset that self-employment tax!

Has anyone actually had the IRS question a business meal deduction because the vendor wasn't a formal business? I've been in business 5 years and have never had this come up in my annual tax filings.

I've been dealing with similar situations in my consulting business and wanted to share what I've learned through experience. The key thing everyone's touched on is absolutely correct - the IRS focuses on YOUR documentation and business purpose, not the vendor's business structure. What I'd add is to make sure you're documenting the business discussion immediately after the meal while it's fresh. I keep a simple note in my phone with: date, attendees, main topics discussed, and how it relates to business operations. This has been invaluable during my record-keeping. For your specific situation with the $67 Venmo payment, I'd definitely categorize it as "Business Meals" rather than trying to hide it elsewhere. The Venmo transaction plus your notes about brainstorming content ideas and quarterly planning clearly establish legitimate business purpose. Being honest and accurate with categorization actually protects you better than trying to obscure legitimate expenses. One last tip - consider having your friend provide you with a simple handwritten receipt that includes their name, date, items provided, and amount. It doesn't need to be formal business letterhead, but having something beyond just the Venmo confirmation can strengthen your documentation if questions ever arise.

Just to add one more perspective as someone who's been self-employed for several years - this deduction is one of the few tax breaks that actually helps level the playing field a bit between employees and self-employed folks. When you're an employee, your employer pays their half of Social Security/Medicare taxes and gets to deduct that as a business expense. Since self-employed people ARE the employer, we get to deduct the "employer portion" (half) of our SE taxes. It might help to think of it this way: you're wearing two hats - employee and employer. The employee half pays 7.65% in payroll taxes, and the employer half pays 7.65% and gets to deduct it. The SE tax deduction lets you deduct the employer portion just like any other business would. The math can definitely look weird in tax software at first, but once you understand the logic behind it, it makes perfect sense!

This thread has been incredibly helpful! As someone who just started doing contract work this year, I was completely baffled when I saw "Self-employment tax" listed under deductions in my tax software. I thought there was some kind of error or glitch. The "two hats" explanation really sealed it for me - I'm both the employee paying 7.65% and the employer paying 7.65%, and just like any other business, I get to deduct the employer portion as a business expense. It's not that I'm avoiding the tax, I'm still paying the full 15.3%, but I get some relief on my income tax calculation. I feel so much more confident about my return now. Thanks everyone for taking the time to explain this - it's one of those tax concepts that seems really counterintuitive until you understand the logic behind it!

This is such a timely question - I'm dealing with the exact same situation with my gaming channel! Based on what I've learned from my accountant, you're absolutely right to start deducting those expenses now even without monetization. The key thing the IRS looks for is "profit motive" - which sounds like you clearly have with your business plan and serious approach. You don't need formal business registration to claim these deductions on Schedule C of your personal return as a sole proprietor. One crucial tip: start documenting EVERYTHING now. I created a simple spreadsheet tracking every expense with date, amount, business purpose, and receipt photo. For those monthly subscriptions like Canva Pro and TubeBuddy, they're perfect examples of "ordinary and necessary" business expenses since they're directly related to content creation. Also consider tracking your time investment - hours spent on video creation, research, learning new skills, etc. This helps demonstrate the business nature of your activity versus just a hobby. The IRS wants to see consistent, profit-directed effort even before revenue starts flowing. The 3-out-of-5-years profit rule others mentioned is real, but don't let it scare you. Many legitimate businesses take time to become profitable, especially in content creation. Your business plan showing the path to monetization through sponsorships will be valuable documentation if ever questioned.

This is such great advice from everyone! I'm in a very similar situation with my DIY home improvement channel - been investing in tools, editing software, and even some basic lighting equipment while building up content before applying for monetization. One thing I'd add that really helped me get organized: I created a dedicated Google Drive folder structure for all my YouTube business documents. I have separate folders for receipts, business planning documents, usage logs for shared equipment, and even screenshots of my analytics showing growth metrics. This makes it super easy to find everything if I ever need to provide documentation. Also, don't forget about mileage if you travel for content! I've been tracking trips to hardware stores for project supplies, driving to filming locations, even trips to pick up equipment. At the current IRS rate of 65.5 cents per mile, those trips add up quickly. I use a simple phone app to track business-related driving. The key thing I've learned is to err on the side of over-documenting rather than under-documenting. Better to have too much supporting evidence than not enough if questions ever come up. Your business plan idea is spot-on - even a simple document showing you've thought through your monetization strategy demonstrates this isn't just an expensive hobby.

I've been through this process twice now and here's my honest take: the 5071C is annoying but not the end of the world. Yes, you absolutely need to verify your identity - ignoring it means no refund ever. For the online route, make sure your phone is fully charged and you have stable internet. The ID.me system can be glitchy and nothing's worse than getting halfway through and having technical issues. I'd also recommend doing it on a computer if possible - the mobile experience isn't great. One thing nobody mentions: after you verify, resist the urge to keep calling the IRS asking for updates. Your case goes into a queue and calling doesn't speed it up, just wastes your time. Most people see their refunds 2-4 weeks after successful verification. Also, if you're really strapped for cash and this is taking too long, look into whether your bank offers refund advance loans. Some will give you money upfront based on your expected refund amount, though there are fees involved. The whole system is frustrating but you'll get through it. Just stay patient and don't let the stress get to you!

I went through this exact same situation about 6 months ago and totally get the stress! The 5071C letter basically means the IRS flagged your return for identity verification - it's become super common lately, especially for returns filed early in the season. Here's what I'd recommend: definitely try the ID.me online verification first. It's usually faster than scheduling a phone appointment. Make sure you have your driver's license, the 5071C letter (you'll need the verification code on it), your Social Security card, and your tax return handy. The facial recognition part can be a bit finicky, so do it somewhere with good lighting and make sure your phone camera is clean. If the online route doesn't work after a couple tries, don't waste days fighting with it - just call the number on your letter to schedule a phone verification. Timeline-wise, after I completed verification it took about 3 weeks for my refund to show up. The "Where's My Refund" tool didn't update for like 2.5 weeks and then suddenly showed a deposit date, so don't panic if it seems stuck on "processing." The most important thing is to get this done ASAP because your return is completely frozen until you verify. Once you do, the processing clock starts ticking again. You'll get your money, just hang in there!