topic Gross receipts over filing limit but net profit/loss under $400 - required to file? in Self employed

Gross receipts over filing limit but net profit/loss under $400 - required to file?

cmc4ew — Fri, 28 Feb 2025 14:35:58 GMT

I realize the below may be pretty straightforward but I'm doubting myself at this point and want to be sure I've got it straight. Appreciate your patience!

I received a PayPal 1099-K for some side work last year. Gross receipts were over the filing requirement but net earnings (profit/loss line on Schedule C) were under $400 (pretty much broke even).

I do not meet the additional filing requirements listed in the Form 1040 and 1040-SR instructions. Do I have to file? Not asking to get around anything, asking based on IRS site saying "You have to file an income tax return if your net earnings from self-employment were $400 or more. If your net earnings from self-employment were less than $400, you still have to file an income tax return if you meet any other filing requirement listed in the Form 1040 and 1040-SR instructions." I realize this reads pretty straightforward, in which case no (?) I would not have to file even though the 1099 is over the limit...but my brain is mush right now so thank you for helping me check my back!

Re: Gross receipts over filing limit but net profit/loss under $400 - required to file?

AnnetteB6 — Fri, 28 Feb 2025 16:07:21 GMT

Based on the guidance of the IRS and your net self-employment income (gross income minus expenses) being below the $400 limit where any self-employment tax would be owed, you do not have to file a return.

Be sure that you do have documentation showing both your income and expenses related to the side work that you did. The IRS could question why a return was not filed since the income by itself is above the $400.

[edited 2/28/2025 | 8:06 am PST]

@cmc4ew

Re: Gross receipts over filing limit but net profit/loss under $400 - required to file?

cmc4ew — Fri, 28 Feb 2025 15:30:48 GMT

Thanks Annette - can I clarify something? You mentioned gross income being below the $400 - gross receipts are over but net profit/loss is under. Which is gross income - gross receipts or net profit/loss? Want to make sure I have the terminology correct, as I think this is likely what is confusing me (different terms being used for various things). Thanks!

Re: Gross receipts over filing limit but net profit/loss under $400 - required to file?

AnnetteB6 — Fri, 28 Feb 2025 15:58:12 GMT

My apologies, I'm the one confusing the terminology this morning. It is your net earnings from self-employment (gross income minus expenses) that needs to be below $400 in order to not be required to file a return.

I will correct the original answer.

@cmc4ew

Re: Gross receipts over filing limit but net profit/loss under $400 - required to file?

user17613355562 — Fri, 24 Oct 2025 20:02:02 GMT

I needed clarification about the same topic. Based on the information in Publication 17, it appears that you would still be required to file because the gross income that is used to determine if you are over the filing threshold includes your gross self-employment income, before expenses are deducted.

From the publication:

Self-employed individuals. If you are self-employed, your gross income includes the amount on line 7 of Schedule C (Form 1040), Profit or Loss From Business; and line 9 of Schedule F (Form 1040), Profit or Loss From Farming. See Self-Employed Persons, later, for more information about your filing requirements.

Re: Gross receipts over filing limit but net profit/loss under $400 - required to file?

user17613355562 — Fri, 24 Oct 2025 20:10:32 GMT

Annette, please see Publication 17:

Self-employed individuals. If you are self-employed, your gross income includes the amount on line 7 of Schedule C (Form 1040), Profit or Loss From Business; and line 9 of Schedule F (Form 1040), Profit or Loss From Farming. See Self-Employed Persons, later, for more information about your filing requirements.
You must file a return if your gross income is at least as much as the filing requirement amount for your filing status and age (shown in Table 1-1).

My understanding is that a return is required in this situation, despite net earnings being less than the $400 self-employment tax threshold, because gross self-employment income (before expenses) is used to determine if the gross income filing threshold is met.