@RedhairMac wrote:
Ok, so we’re back to hobby vs. self-employed. I was told earlier by another expert that if I sell goods for profit, I’m self-employed. However, I consider what I do as a hobby….no expense records kept. The response above cites “IF” this is a hobby….which connotes that the taxpayer is able to make a choice, e.g., business or hobby. Is the choice truly mine or, as stated by another expert, is there no choice and I’m automatically considered self-employed?? And if I get to choose that my side gig is indeed a hobby, then all income over $600 is taxable without the benefit of writing off expenses? How is that fair??
1. The IRS has a list of factors to be considered.
https://www.irs.gov/newsroom/heres-how-to-tell-the-difference-between-a-hobby-and-a-business-for-tax...
You make whatever determination you like, but those are the factors the IRS will consider in the unlucky chance of an audit.
If you characterize a hobby improperly as a business (to deduct more expenses) the IRS can reverse that if you can't prove your case, but likewise if you characterize a business improperly as a hobby (to avoid self-employment tax, for example) the IRS can also reverse that if you can't prove your case.
2. All your taxable income is taxable, not just income over $600. $600 is the level that triggers a report, but if you have taxable income, you must report all of it.
3. You have never actually stated why you get paid, you chimed into a question about gifts from family and friends but that does not appear to be your situation. If you are selling personal tangible property, you only pay tax on items sold for more than their cost, but the burden is on you to prove it. See for example this question and answer.
https://ttlc.intuit.com/community/file-with-turbotax/discussion/re-selling-on-ebay-but-selling-my-ow...
4. Remember as I stated above, the payment processor reports the total transactions on a 1099-K. Whether or not that is taxable income, and what kind of taxable income, and how much, is up to you to prove to the IRS. The report by itself does not make the income taxable, but it tells the IRS to look for some kind of explanation on your tax return.
