1. Yes, all income is to be reported, whether you get a tax form or not and no matter the amount.
Hobby income and Self-Employed income are both taxable income and need to be reported.
2. There is NOT a choice of Schedule C versus 1099-K.
In your situation, there is only a choice of Self-Employment or Hobby
Form 1099-K is a form that a "Third Party Payer" such as Apple or E-Bay sends out, one copy to the Taxpayer and one copy to the IRS. This is information about money that passed through the payer to the Taxpayer. What the Taxpayer does about reporting this amount is up to the Taxpayer. It could report money that passed through for selling things on E-Bay and might be reported on Schedule D as a capital gain. For your situation, it was for an app you published, so it's Self-Employment (Schedule C) or Hobby income (Other Income).
3. If you do something for "fun" and it results in receiving income, you can report that income as "Hobby Income".
Since a hobby is for fun, the IRS does not allow you to take expenses against that income. Therefore, if people paid $200 for your app, the $50 Apple fee cannot be claimed.
Yes, you would be taxed on money that never made it to your pocket.
If you have a business that is fun and it results in receiving income, you can report that income as "Self-Employment".
Self-Employment income is reported on Schedule C. If you get tax forms, like 1099-NEC or 1099-K, you would list those on your schedule C (along with any other business income including cash) and also claim expenses which are ordinary and necessary for the business.
Self-Employed taxpayers are responsible for paying their own FICA (Social Security) Tax, that is referred to as "Self-Employment" Tax.
If the "Business" shows a loss year after year, or the IRS does not see this as an attempt to earn a profit, the IRS could require you to report it as Hobby Income.
There was a time when miscellaneous expenses (including hobby expense) could be reported (within limits) on Schedule A, but that is not available for Tax Year 2023.
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