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Just to add my experience: I made about $800 last year from online tutoring and didn't realize I needed to pay taxes on it until this thread. I called the IRS and they said since it's under $1000 I just include it when I file my regular tax return by April 15th. You'll need to fill out a Schedule C form for your business income/expenses and Schedule SE for the self-employment tax portion. And definitely keep track of ANY expenses related to earning that money - supplies, software subscriptions, portion of internet if you worked from home, etc. Those all reduce your taxable income!
Do you know if we can just use regular tax software for this? Or do we need something special for self-employment stuff?
Regular tax software will work fine for this amount of self-employment income. All the major ones (TurboTax, H&R Block, TaxAct, etc.) can handle Schedule C and Schedule SE. Some free versions have limitations though, so you might need to pay for a slightly upgraded version that handles self-employment. The software will walk you through the specific questions about your business income and expenses. Just make sure to select the option that indicates you have self-employment or business income when you start the process.
I think everyone's forgetting something important here - at $650 in self-employment income, after taking the standard deduction, you probably won't owe any regular income tax at all! You'll just owe the self-employment tax portion which is around 15.3% of your net profit (after expenses).
Just wanted to share that you should file ASAP even if you can't pay everything right now. The failure-to-file penalty is 5% of unpaid taxes for each month your return is late (up to 25%), while the failure-to-pay penalty is only 0.5% per month. So filing without paying in full is 10X better than not filing at all! Plus, once you file, you can set up a payment plan. I did this when I fell behind during COVID and it was surprisingly easy to set up online.
Did you use the IRS's online payment plan setup? I'm wondering how flexible they are with the monthly payment amounts and if they charge a lot of interest while you're paying it off.
Yes, I used the online payment plan tool on IRS.gov. It was much simpler than I expected. You can actually propose your own monthly payment amount based on what you can afford. There is a minimum (I think around $25-50) but they're pretty flexible. They do charge interest (federal short-term rate plus 3%, compounded daily) and a small failure-to-pay penalty while you're in the payment plan, but those rates are way lower than credit cards or loans. You'll also pay a setup fee ranging from around $31 to $130 depending on how you apply and pay, but low-income taxpayers can get reduced fees or even have them waived.
Quick tip: If your tax situation is fairly straightforward (W-2 income, standard deduction), check if you qualify for the IRS Free File program for prior years. Some of the participating software providers offer free filing for certain income levels even for previous tax years.
This is helpful! Do you know which software providers specifically offer free prior year filing? I looked at TurboTax but they wanted to charge me for going back to 2022.
Former IRS employee here. Accountants SHOULD be looking at primary sources, but many don't. In my experience, you can divide tax professionals into three groups: 1. Those who rely almost entirely on software and general knowledge 2. Those who use reference materials like the CCH or RIA services that summarize tax law 3. Those who regularly go back to the actual IRC, Treasury Regs, Rev. Rulings, etc. Group 3 is smaller than you'd hope. For your vehicle expense situation, ask your accountant specifically about IRC 274(d) and the substantiation requirements. If they can't speak intelligently about that, you might want to find someone who can.
This breakdown is really helpful. Is there a diplomatic way to figure out which type of accountant I'm dealing with without offending them? I'm paying good money and want someone who falls into your third category.
Ask them about a recent tax law change and how they stay current on updates to the code. Good accountants will mention specific resources they use to track changes to primary tax law. You could also ask a specific question about your situation and request the citation to the relevant code section. Be direct but respectful - "I'd like to understand more about the underlying tax code for my situation. Could you point me to the specific sections that apply so I can read more?" A good accountant won't be offended by this. They'll appreciate a client who wants to be informed. If they get defensive or dismissive, that tells you a lot about which category they fall into.
I'm an accounting student and we're actually taught to always reference primary sources. Our professors constantly remind us that tax software and secondary sources can be wrong or outdated. The hierarchy we learn is: 1. Internal Revenue Code (the actual law passed by Congress) 2. Treasury Regulations (IRS interpretation of the law) 3. Revenue Rulings and Procedures 4. Court cases 5. IRS Publications and other guidance Software and books are just tools to help navigate these sources. For your vehicle expense question, I'd specifically look at IRC 274(d) and the related Treasury Regulations at 1.274-5T.
As someone who's been in practice for 25 years, I can tell you that what they teach in school and what happens in the real world are very different. Most accountants use specialized tax databases and software. Nobody has time to read the entire IRC for every client question.
Don't forget to consider if any of these jobs withheld Social Security or Medicare taxes! Even if you're under the filing threshold, you might want to file to get those back. Check box 4 and 6 on your W-2s!
Thanks for mentioning this! I didn't even think about that. I'll have to look at the paperwork I got and see if anything was withheld. Would I get all of that back if I file?
Yes, if your income is below the filing threshold and you had federal income tax withheld (box 2 on your W-2), you would get that money back when you file. However, I need to correct myself about Social Security and Medicare taxes (boxes 4 and 6) - those generally aren't refundable even if you're below the filing threshold. The employer is required to withhold those regardless of how much you make. So you won't get those specific taxes back, but any federal income tax would be refunded.
Just to add from personal experience - I had a similar situation in 2023 and didn't file. The IRS never contacted me because the amounts were so small. Just make sure you keep records of what you earned for at least 3 years just in case there's ever a question!
I made like $200 from DoorDash last year and didn't file anything. Should I be worried?
Zara Khan
I just wanted to add that TurboTax's policies on data retention are actually pretty terrible. They only guarantee they'll keep your returns for 7 years, but in practice, their system "loses" returns much more frequently. Something similar happened to me, and when I pressed their customer service supervisor, they admitted they had a system migration in 2022 that caused many accounts to lose data from 2019-2021. They won't publicly admit this though and keep giving people the runaround.
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MoonlightSonata
β’Is that actually legal though? Aren't they required to keep tax records for a certain period of time since they're an authorized e-file provider? Seems like there should be some regulation about this.
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Zara Khan
β’There's a difference between what's legally required and what they promise customers. Tax preparers are required to keep certain information for their compliance purposes, but that doesn't mean they're required to make it available to customers indefinitely. Their terms of service (which nobody reads) actually states they only "strive" to maintain access to returns for 7 years but make no guarantees. It's buried in the fine print. The IRS requires them to keep certain records, but that's for audit purposes, not customer convenience.
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Mateo Gonzalez
Has anyone tried the TurboTax Audit Defense team? I remember when I filed, I paid extra for some kind of protection plan that supposedly included keeping records longer. Wonder if that would help in this situation?
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Nia Williams
β’TurboTax Audit Defense is completely separate from their data retention policies. It's basically just insurance that provides representation if you get audited. I paid for it too thinking it included document storage, but when I called about missing returns, they told me it was completely different departments and services.
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