Online Language Tutor Confused about taxes

[JoaElizaC]

I tutor online independently and on an online marketplace. I've done this for a few years, never really understanding how taxes work for someone like me. I was told that if I earned less than $20k/yr, I didn't have to file or pay taxes. I have never received any 1099 forms from any of the other online marketplaces for which I've tutored. How does this label me, tax-wise?

For 2022, I netted about $5,000. I file jointly with my husband who has a salaried employment in a company that withdraws his taxes for him. This means I owed $765 in taxes ($5,000 x 15.3% = $765), right? We both owed and filed jointly, so I couldn't know how much came from me and how much came from him.

Living in Florida, I am aware there is no State Tax.

If my independent tutoring continues along this path (grossing around $10k/year), does this mean I could pay my taxes once by April 15, or should I pay my taxes quarterly? If I need to pay quarterly, do I just pay 15.3% of whatever I made that quarter, no matter how much my personal income fluctuates (it's not fixed at all), or should it be a slightly higher amount to cover for the "leaner" quarters?

Thank you for your time and attention.

[xmasbaby0]

"I was told that if I earned less than $20k/yr, I didn't have to file or pay taxes."

Who told you that?

You have been mistaken.   If you had even $400 of self-employment income you were supposed to file income tax returns and pay self-employment tax for Social Security and Medicare.  

You have self-employment income for which you will pay self-employment tax for Social Security and Medicare; you will need to use online Premium software or any version of the download so that you can prepare a Schedule C for your business expenses.

https://ttlc.intuit.com/questions/2926899-how-does-my-side-job-affect-my-taxes

https://ttlc.intuit.com/turbotax-support/en-us/help-article/form-1099-nec/1099-nec/L5qTsBiSe_US_en_U...

https://ttlc.intuit.com/community/self-employed/help/how-do-i-report-income-from-self-employment/00/...

https://ttlc.intuit.com/community/self-employed/help/what-is-the-self-employment-tax/00/25922

https://ttlc.intuit.com/questions/2902389-why-am-i-paying-self-employment-tax

https://ttlc.intuit.com/questions/1901340-where-do-i-enter-schedule-c

https://ttlc.intuit.com/questions/3398950-what-self-employed-expenses-can-i-deduct

https://blog.turbotax.intuit.com/self-employed/self-employed-tax-deductions-

calculator-2021-2022-50907/

https://ttlc.intuit.com/questions/1901110-do-i-need-to-make-estimated-tax-payments-to-the-irs

If you live in a state with a state income tax, you might need to make estimated payments to your state.

https://turbotax.intuit.com/tax-tools/calculators/self-employed/

https://ttlc.intuit.com/community/business-taxes/discussion/self-employed-don-t-miss-these-tax-moves...

[VolvoGirl]

Oh I think you might be talking about no getting a 1099K from online for less than 20,000 .  

You need to report all your income even if you don't get a 1099NEC, 1099K or 1099Misc. You use your own records. You are considered self employed and have to fill out a schedule C for business income. You use your own name, address and ssn or business name and EIN if you have one. You should say you use the Cash Accounting Method and all income is At Risk.

Do you need to file a return? Yes if you have $400 or more in self-employment net earnings (gross income minus expenses)
https://ttlc.intuit.com/community/filing-and-paying-taxes/help/do-i-need-to-file-a-federal-return-th...

Self Employment tax (Scheduled SE) is automatically generated if a person has $400 or more of net profit from self-employment. You pay 15.3% SE tax on 92.35% of your Net Profit greater than $400. The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare. So you get social security credit for it when you retire. You do get to take off the 50% ER portion of the SE tax as an adjustment on 1040. The SE tax is already included in your tax due or reduced your refund. The SE tax is in addition to your regular income tax on the net profit.

Here is some IRS reading material……
IRS information on Self Employment
https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center

Publication 535 Business Expenses
https://www.irs.gov/pub/irs-pdf/p535.pdf

Turbo Tax Self Employed Tax Hub
https://turbotax.intuit.com/personal-taxes/self-employment-taxes

Turbo Tax Self Employment info
https://turbotax.intuit.com/tax-tips/self-employment-taxes/beginners-tax-guide-for-the-self-employed...

Do you need to amend 2022 and  2023 to add your self employment income?  

[JoaElizaC]

"You should say you use the Cash Accounting Method and all income is At Risk."

- what does this mean?

[KarenL4]

HI, JoaElizaC,

Unfortunately, you have been misinformed about your tax filing obligations. If you are self-employed, you must file a tax return if you have more than $400 in net self-employment earnings. This article will explain your filing obligations.  Sorry to continue with potential bad news, but not filing a federal tax return when required subjects you to both failure to file and failure to pay penalties, if you owed taxes. Here's some information about that.

You likely want to start paying self-employment taxes quarterly (and estimated income taxes).  The tax system is a pay as you go system, and, if you owe more than $1000 when you file your taxes, you may be subject to failure to pay penalties if you are not eligible for an exception (such as safe harbor).    Note that self-employment taxes are in addition to income taxes (they are FICA and Medicare taxes) and come as a surprise to many new to self-employment. This article  explains about the requirements and safe harbor rules to avoid penalties.

I know this is a lot.  Keep in mind that the first step is to get into compliance.  You can find TurboTax software  to catch up on some of your back taxes here and you may wish to consider engaging an pro. There are several out there and a verified pro may be an option you wish to consider.  Also keep in mind you can often set up a payment plan related to your tax balances. Here's some info on that.

Hope this helps.

**Please cheer or say thanks by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

Regards,

Karen

TurboTax Expert

[VolvoGirl]

When you fill out schedule C in your personal return the program will ask  if you use the Cash Method or Accrual Method to report your income and expenses.   The most common method is CASH. It means you report your income in the year you actually receive it and report your expenses in the year you actually pay them. See,
https://ttlc.intuit.com/community/business/help/what-is-the-cash-method-of-accounting/00/25658

It will also ask if you are "at risk".  If you have money not at risk you can not take a loss on schedule C. If you don't know what it means then probably All your Investment is at Risk.  It means you are using your own money for the business.

Money is not "at risk"  for the following:

---Non-recourse loans used to finance the business

---Cash, property or borrowed amounts used in the business that are protected against loss by a guarantee, stop-loss agreement, or other similar arrangement (excluding casualty insurance and insurance against tort liability).

---Amounts borrowed for use in the business from a person who has an interest in the business, other than as a creditor.

[JoaElizaC]

Thank you so much for clarifying.