Do I need to file a Schedule C is my income is below $400?

[DTalley111]

In 2018 I decided to design and sell a product, and I have been trying to figure out if I need to file taxes and if so, what form.

I sold products via a forum and took payment via paypal, but I didn't meet the minimum for paypal to send me a 1099-K. So after realizing that I decided to look up what is needed and found info about the Schedule C form, but have no idea if I need to file it or not.

I have a few questions:

1) Does the taxable income include the amount that was spent on expenses to design the products and sell them? Or is it subtracted and therefore not taxable?

2) I made less than $400 net, after expenses, do I have to pay any taxes even if I was paid via a 1099-MISC that all went to paying for expenses(and totaled over $400)?(Does self-employment tax apply to me, and if so did I mess up not paying it during the year?)

3) When filling out the TurboTax income section, do I put "Gross - Cost of Goods Sold - Expenses = Net" or "Gross - Cost of Goods Sold = Net" and then list the expenses separately?

4) And finally am I right in that I need to file a Schedule C? And does the TurboTax self-employment version do that automatically?

I have never filed anything other than with a W-2, So I am sorry if some of the questions have obvious answers, I want to make sure I am understanding everything correctly and do mess up my taxes and get audited because of that.

[DawnC0 · Accepted solution]

Technically, no, you don't have to file a return if your only income is less than $400 from self-employment.  However, if you received any 1099-MISC or 1099-K, the IRS did too and you can avoid hearing from them by choosing to file.  And since you are going to continue this business, you should go ahead and file a Schedule C this year (it will carry over to next year).  And yes, it is a Schedule C you need as a self-employed individual.  You will file it along with your personal tax return.   

TurboTax Self-Employed is exactly the product you want to use to accomplish this.  As a self-employed person, you are responsible for not only the income tax but also Self-Employment tax.  Self-Employment tax is the Social Security and Medicare portions.  However, these taxes are paid on Net Income, which is "Gross - Cost of Goods Sold - Expenses = Net".  TurboTax will walk you through this step-by-step.  

You won't have any issues with SE tax this year since you know your net income was low.  After you complete your tax return with your new Schedule C, you can go through the 'Estimated Taxes' section and set-up quarterly payments for next year if you need to.  The program will let you know if and when you need to make quarterly payments based on your estimates.

[Asta]

Hello. i tried out doordash few days ago just to see what it is like to work with doordash. Now that i know about tax, i don't think i will continue. So far, i made 103.21, am i required to report this income or pay tax on it. i looked up information online and found that if you make less than 400 per year, you dont have to pay tax on it, is it true? can anyone here shed me some lights. thank you!!

[AmeliesUncle]

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@Asta wrote:

Hello. i tried out doordash few days ago just to see what it is like to work with doordash. Now that i know about tax, i don't think i will continue. So far, i made 103.21, am i required to report this income or pay tax on it. i looked up information online and found that if you make less than 400 per year, you dont have to pay tax on it, is it true? can anyone here shed me some lights. thank you!!

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No, that is not true.  It is still subject to income tax.  Business income that is under $400 is not subject to Self-Employment Tax (Social Security and Medicare taxes), but it is still reportable as income.

But keep in mind you keep doing DoorDash (as your own business), you get to claim your mileage deduction.   So hypothetically, let's say you drove 100 miles to get that income.  Using the Standard Mileage Rate, you would get a deduction of $57.50.  So rather than paying tax on $103, you would pay tax on $56.

But on the other hand, keep in mind Self-Employment tax.  That is 15.3% of your profit, PLUS there is your 'regular' income tax.

[Asta]

Would you mind giving more examples? 

In my current case, i am making 30k per year from my regular job(8-5 job) and doing doordash as a side job. As you know from my previous post, i have been doing doordash for a few days and so far made $103. I ran the math and figured out that i am losing net. My mileage  is 166 which is .58 x 166 = 96.28$ + 10.5$ phone service(15%) = 106.78. 

Can i deduct the loss net from my regular income. which this is what i think it should look like 30k - 3.78. = i make 29996.22 this year instead of 30k. i know that this is really small amount and i shouldn't even think of reporting it but this will be for education purpose. Would you please shed some light? Thank you! 

[SusanY1]

Yes, you can likely deduct this loss.  If you have no other self-employment income to report this year, and you are using an online TurboTax product, I would not report and deduct it this year because the upgrade to the program required to do so will cost more than the benefit, and you are under the threshold that requires you to file it.  

@Asta

[tim0001]

If you would please offer your opinion to a simulacra situation:

New single member LLC, I made net $300 profit (ebay) and was under the $600 limit and never received any 1099.  If I am not required to file the Schedule C, them where do I list the $400 on my 1040?  Schedule 1, and I assume I should for good practice file the Schedule C as well.  Is this correct?

Thanks

[AmeliesUncle]

*IF* it is a business, it still goes on Schedule C, even if Self Employment Tax is not owed.

If it is a "hobby", it should end up as "other income" on line 8i of Schedule 1.

[VolvoGirl]

You should just fill out schedule C for it.  You said the Net profit was 300?  You should report the full gross amount as income on schedule C and then enter the expenses to get the Net Profit or Loss. 

Actually you can just enter it as Other self employment income or as Cash or General income. You don't need to get a 1099NEC or 1099K. Even if you did you can enter all your income as Cash. Only the total goes to schedule C.

You can enter Self Employment Income into Online Deluxe or Premier but if you have any expenses you will have to upgrade to the Self Employed version. Or use any of the Desktop CD/Download programs. How to enter income from Self Employment
https://ttlc.intuit.com/community/self-employed/help/how-do-i-report-income-from-self-employment/00/...