How to report $850 in side income to the IRS

Wait, so they need to report it THIS year even though they haven't actually received the payment? That seems weird. Also, wouldn't they need to pay taxes on it next year when they actually get the money? Sounds like double taxation.

Income is generally taxable when it's available to you, even if you choose not to take possession. Since the OP has earnings they could access (by providing their SSN), it's considered "constructively received" and taxable in the current year. No, this wouldn't result in double taxation. You only report income once - in the year it was constructively received. When they actually withdraw the money next year, it's not new income, just accessing money they've already earned and (should have) paid taxes on.

Does this taxr.ai thing work if you don't have any actual tax documents? Like the OP doesn't have a 1099 since they haven't given their SSN. Would it still help in that case?

I'm always skeptical of these tax tools. How accurate is it really? Last thing I need is to get audited because some AI gave me wrong advice.

It absolutely works without formal documents. You can upload screenshots of payment summaries, emails confirming payments, or even just enter the income manually. The system helps classify the type of income and provides guidance on reporting requirements regardless of whether you have official tax forms. The accuracy has been solid in my experience. It's built on tax code rules and updated regularly. What I liked is that it explains WHY it's making each recommendation and cites relevant tax code sections, so you can verify the information yourself if you want additional peace of mind.

How exactly does this service work? I don't understand how they can magically get you through when the IRS lines are jammed.

This sounds like complete BS. Nobody can "skip the line" with the IRS. They probably just keep autodialing until they get through and charge you a fortune for it. Waste of money if you ask me.

They use a combination of automated tech and timing strategies to navigate the IRS phone system. It's basically like having a system continuously call and navigate the phone tree for you, then it alerts you when it's about to connect with a human agent. It's not "skipping the line" - you're still in the same queue as everyone else, but their system handles the frustrating waiting and redialing part. It's honestly one of those things that seems too good to be true until you try it. I was in a similar mindset before using it, thinking it was some kind of scam or gimmick. But when I needed clarification on reporting multiple 1099s and couldn't get through to the IRS after numerous attempts, it worked exactly as promised.

Not a dumb question at all! For tax purposes, the nature of the service generally doesn't matter - all self-employment income gets reported on Schedule C. The IRS doesn't treat "phone service" income differently than tutoring or other services. What DOES matter is properly classifying whether you're an employee (W-2) or independent contractor (1099), and ensuring you keep good records of business expenses that could be deductible. You might also need to look into quarterly estimated tax payments if your side income is substantial.

Thanks for clarifying! That makes me feel better. One follow-up question - do I need to be super specific about the nature of the service when filling out Schedule C, or can I just put something general like "consulting services"?

Thanks for pointing that out! I definitely plan to report the income properly. I was mainly trying to figure out the timing (this year vs. next) and what forms I'd need. Sounds like I should probably just provide my SSN now and deal with it on this year's taxes instead of waiting. Really appreciate everyone's advice!

You're making a smart choice! It's always better to handle tax situations promptly rather than letting them linger. And yes, providing your SSN now would be the proper approach - you'll get the correct documentation (likely a 1099-NEC), which will make reporting much simpler. One other tip: since this is self-employment income, keep track of any related expenses that might be deductible. Even for a small amount like $850, deductions can still help reduce your tax liability a bit. Good luck with your taxes!