What qualifies as self-employment income for tax purposes?

What you're describing is definitely self-employment income! The IRS considers income from any activity you do for profit (without being an employee) as self-employment income. All those activities - dog walking, web design, and Etsy sales - count if you're doing them to make money rather than just as a hobby. The $400 threshold your friend mentioned is correct - if you make more than $400 in net self-employment income, you need to report it and pay self-employment taxes (which cover Social Security and Medicare). With $8,700 in income, you'll definitely need to file a Schedule C. For your expenses, you can deduct ordinary and necessary costs directly related to your business. For dog walking, that might include mileage driving to clients, leashes, treats, etc. For web design, software subscriptions, computer equipment (partially), internet (partially). For Etsy, materials costs, shipping supplies, Etsy fees, etc.

I was in a similar situation last year with multiple side hustles and found this amazing tool called taxr.ai (https://taxr.ai) that really helped me figure out what counted as self-employment income vs hobby income. It analyzed all my receipts and bank statements and helped categorize everything properly. The tool uses AI to identify deductible business expenses you might miss - it caught over $2,300 in deductions I would have overlooked! What I really liked is that it explained the rules for each type of income so I understood why certain things qualified as self-employment while others didn't.

I want to follow up on my skeptical comment about taxr.ai. I decided to try it anyway since my tax situation was complicated this year with my Etsy shop and freelance writing. I'm honestly impressed - it found over $1,250 in deductions I would have missed. The interface actually walks you through specific questions about your particular type of self-employment and explains the different rules. It correctly identified that my writing was definitely self-employment while some of my occasional craft sales fell into a gray area. It even created a proper profit/loss statement for my Schedule C. I know this sounds like an ad but I'm genuinely relieved I found something that made self-employment taxes manageable.

For anyone struggling to get answers about what qualifies as self-employment, I spent HOURS trying to call the IRS with no luck. Then I tried a service called Claimyr (https://claimyr.com) and they got me through to an actual IRS agent in under 20 minutes! You can see how it works here: https://youtu.be/_kiP6q8DX5c. I was able to ask specifically about my situation where I do computer repair sometimes for cash and sometimes through an app, and got clear guidance on how to report everything. The agent even walked me through which form to use for each income stream. Before this I was on hold for literally hours with no luck.

I need to apologize for my skeptical comment about Claimyr. I was frustrated after wasting an entire day on hold with the IRS. I decided to try it as a last resort before hiring an expensive accountant, and it actually worked! Got connected to an IRS agent in about 15 minutes who answered all my questions about what qualifies as self-employment for my photography side business. They confirmed that I needed to report all my income on Schedule C since I'm definitely operating as a business, not a hobby. The agent also explained that I could deduct a portion of my camera equipment, editing software, and even my home studio space. Saved me from making some big mistakes on my return.

Here's a simple breakdown of what qualifies as self-employment income vs hobby: - Self-employment: You do it regularly, keep business records, depend on the income, work at it consistently, have expertise in it, make changes to increase profitability - Hobby: You do it irregularly, don't really need the money from it, do it mainly for fun, don't spend much time on it If you have a hobby, you still report the income but don't pay self-employment tax and can't deduct losses. With $8700, chances are its self-employment. Most of my "hobby" friends who started making real money had to switch to treating it as a business after they crossed about $2000 in annual income.

Don't forget that if your net self-employment income is over $400, you need to make estimated quarterly tax payments throughout the year! I learned this the hard way and got hit with penalties my first year.