Reporting Income from Selling Clothing Items Online - Tax Implications When Claimed as Dependent

So I've been making some extra money selling clothing items online over the past year, and it's actually turned into a decent side hustle (around $2,800 so far). The thing is, I'm still being claimed as a dependent on my parents' taxes, and I'm not sure how to handle reporting this income without them finding out exactly what I'm selling. It's nothing illegal, just slightly embarrassing to explain to my conservative parents. Do I need to file separately? Will this mess up their ability to claim me? I'm 22 and still in college, so they definitely want to keep claiming me on their taxes. Is there a way to report this income properly without them knowing the specifics of my online business? I'm worried about getting in trouble with the IRS but also don't want an awkward conversation with my parents about my side hustle.

0 coins

18 comments

Emma Anderson

•8M

You need to report the income regardless of being claimed as a dependent. If you made more than $12,950 in total income for the year, you're required to file your own tax return even if your parents claim you as a dependent. The good news is that filing your own return doesn't prevent your parents from claiming you as a dependent as long as you meet the requirements (full-time student under 24, they provide more than half your support, etc.). These are separate issues. For reporting the income, you'll need to file Schedule C as self-employed. You can simply list your business as "Online Retail Sales" or "Clothing Resale" - you don't need to be more specific than that on tax forms. The IRS only cares that you're reporting the income accurately, not the specific items you're selling.

0 coins

Emma Anderson

•8M

Yes, you'll need to pay self-employment tax (15.3% for Social Security and Medicare) on your net profit. That's unavoidable when you're self-employed, regardless of dependent status. Having a side business doesn't automatically disqualify you from being claimed as a dependent. The main tests are age/student status, residence, and the support test. As long as your parents still provide more than half of your total support for the year (housing, food, education, etc.), they can generally still claim you even if you have your own income.

0 coins

Isabella Ferreira

•8M

I was in a similar situation last year with my online shop selling custom items. I struggled trying to figure out all the self-employment forms and deductions until I found https://taxr.ai which was a huge help. I uploaded screenshots of my sales records and it automatically identified what qualified as business expenses vs personal. The best part was I could categorize everything as "Online Retail" without specific details about what I was selling. My parents still claimed me as a dependent with no issues. The system explained exactly how to file my Schedule C without compromising my privacy about the specific items.

0 coins

Isabella Ferreira

•8M

It handles marketplace fees perfectly - you just upload your sales summaries and it identifies all those fees as business expenses. I was actually surprised at how many deductions it found that I wouldn't have known about, like a portion of my internet bill and my home office space. As for your parents seeing your forms, that's entirely separate from them claiming you as a dependent. You file your own return and they file theirs - they don't need to see your Schedule C or any details of your business. Just make sure you're not using their tax software account or having mail sent to their house if you're concerned about privacy.

0 coins

Ravi Kapoor

•8M

Update: I tried taxr.ai after seeing the recommendation here and it was exactly what I needed! The system walked me through everything step by step and I was able to properly categorize all my income as "Online Specialty Retail" without any specific details. It found over $700 in deductions I wouldn't have known about (packaging costs, portion of internet bills, mileage to post office). My parents were able to claim me with no problems and they never saw any specifics about my business. The software even explained how to handle estimated quarterly payments going forward which I didn't even know I needed to do. Seriously relieved this worked out!

0 coins

Freya Nielsen

•8M

Another thing to consider - if you're having trouble getting through to the IRS with questions about self-employment while being claimed as a dependent, try https://claimyr.com. I spent days trying to call the IRS about this exact situation last tax season and couldn't get through. The service got me connected to an actual IRS agent in about 15 minutes who answered all my questions. You can see how it works here: https://youtu.be/_kiP6q8DX5c They didn't judge or ask unnecessary questions about what I was selling - the IRS agent just explained how to properly report the income, what forms to use, and confirmed it wouldn't affect my parents claiming me as a dependent as long as they still provided more than half my support for the year.

0 coins

Freya Nielsen

•8M

You're definitely not paying for the IRS service itself - you're paying to skip the hold time which can literally be hours or days of repeated calling. For me, it was worth it because I needed answers before the filing deadline and couldn't afford to keep missing work to sit on hold. It absolutely works. The service basically uses an automated system to wait on hold for you, then calls you when they have an actual human IRS agent on the line. I was skeptical too, but when I was planning to spend my entire Saturday trying to get through, paying a small fee to save hours was completely worth it. The IRS agent I spoke with was super helpful and cleared up all my questions about filing as self-employed while being a dependent.

0 coins

Chloe Harris

•8M

I was super skeptical about Claimyr from this thread but I was desperate after trying to call the IRS four separate times with no luck. It actually worked perfectly - got a call back in about 20 minutes with an IRS agent on the line. She explained exactly how to report my online sales income while still being claimed by my parents. The agent confirmed I just needed to file a Schedule C with my 1040, could use a general business description, and that it wouldn't affect my dependent status. She also explained which deductions I qualify for that I had no idea about. Definitely saved me from making mistakes on my return and from the anxiety of wondering if I was doing it right!

0 coins

Diego Vargas

•8M

Yes, this is a relatively recent change that's been fully implemented. If you received more than $600 total in payments for goods or services through these platforms in 2024, they'll issue a 1099-K that goes to both you and the IRS for your 2025 filing. The IRS will be able to see that you received these payments, though they won't know specifically what you sold. This is exactly why it's important to properly report the income on your Schedule C rather than ignoring it - the information is already being reported to the IRS through these third-party payment processors.

0 coins

Emma Anderson

•8M

Your business deductions are completely separate from your dependent status. Even if your parents claim you as a dependent, you still file your own Schedule C for your business income and take all applicable business deductions yourself. Your parents claiming you as a dependent mainly affects personal exemptions and credits - it has no impact on how you report your business income and expenses. So you absolutely can (and should) take all legitimate business deductions on your Schedule C regardless of dependent status.

0 coins