Business income vs Hobby income vs Misc/other income. Also Amazon Vine Program.

[Deb4now]

You mentioned it would be hard to prove 40,000 you didn’t make a profit etc but I’m sad to say that vine sucked me in and I didn’t realize and to date they show I have items estimated taxable value of 63,000. Now the sellers offer coupons for substantial amounts off but viners don’t get to use those. The way it’s set up is a separate web page with the items we can request. When I say that I have decorated my house I have. I don’t understand how this is income. Maybe paying sales tax but Amazon puts the item as purchased with an amazon gift card. It’s confusing and I can say the 6 month rule is you cant sell or give away before 6 months. I’ve not sold anything. I’ve been unemployed disabled and I started doing this for fun. We got new mattresses , furniture, decor and more but I needed it all and otherwise would not have been able to get these things. I just hit 6 months and I did donate a lot of items to a shelter for kids in crisis. Hundreds of dollars worth of items. Bedding ,mattress, bed frame, toys . This should be a write off too no?

[Kabake8]

One of the stipulations of participating in Vine is none of the products received can be gifted or sold for 6 months and by that time their ‘value’ as far as re-sale has significantly decreased or is non-existent therefore I don’t see this as being a potential source of income 

[SmallCow]

I know you don't consider this as income, but the IRS does. We are required to file our taxes and report the amount according to the 1099-NEC reported by Amazon.  Disability income is taxable over a certain threshold when you have other income like Vine.

You should refer to the IRS 1040 instruction booklet,  then to the tax bracket in which it places you, and immediately make arrangements to pay the IRS. They can garnish disability income for unpaid taxes and bankruptcy doesn't write off your tax debt. I'm also on disability and have kept my taxable amount of products under $600 to avoid having to file at all. Social Security may also consider it to be substantial gainful activity so it might be a good idea to opt out of the Vine program. Lastly, write offs are not allowed for hobby income, per the IRS.

Someone stated, incorrectly, that this is bartering income. It's not. Bartering is reported on a 1099-B form and that doesn't apply here. We're issued a 1099-NEC by Amazon and the IRS states where that is to be reported: "If you're not an employee of the payer, and you're not in a self-employed trade or business, you should report the income on line 8j of Schedule 1 (Form 1040)."  We're all concerned, but the most important thing is that we report it. Failing to file when required, failing to report the income, or under-reporting the amount are things that will absolutely get you in trouble. 

[rennevat]

I realize that this is an older message but thought I'd add a few points to clarify the question because so many of us who are Amazon Vine reviewers are also in tax limbo.

Some important considerations about the program:

The vine program is not a barter or compensation for a service.   Per Amazon's Vine TOS: "Products are promotional offers to you and are not sold to you".

We are not being given a product (compensation) in exchange for a review (service).  We are not required to review the products that we choose.  Per the TOS, we are required to review at least 50% of the products we choose IF we want to continue receiving promotional products in the future.  But, we could receive 100s of promotional products over a 6 month period and never leave a review (which would result in termination of participation).

Per Amazon:  "title of Vine items transfers to you at the time of delivery to you".  We are allowed to keep or destroy the items we receive.  However, we can not transfer or sell the items we receive for 6 months.  

To review any of the products we receive, we either consume them (urinalysis test strips, food, health care items, pet potty pads) or render them used (bed sheets, replacement parts, clothing, etc).  So essentially, after we comply with the TOS for our business or hobby, we are left with used or depleted products which can not be sold for 6 months (if at all).

If this is a hobby, we still only end up with used products once the reviews are completed for the hobby.

If this is a business, how do we expense the sale of used products after the required 6 months, or expense those items that were consumed primarily for reviews and no longer exist for resale?

An additional problem is Amazon's Estimate Tax Value of items (they use the seller's listed price not including discounts the seller offers the public).  Per the IRS "FMV is the price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts".

Vine products are typically priced higher than competitor products (presumably so that the seller can take a bigger tax cut while it's a available as promotional product on Vine).    So typically, the FMV value that Amazon reports on the 1099 is 20-30% higher than if we had just purchased the item outright through Amazon or any other competitor's website.

Any filing clarification or guidance would be greatly appreciated (by thousands of Vine participants)

Thanks in advance!

[annon1]

As someone new to Vine as of late Oct 2023 I was grateful to find this thread (via google/reddit). As I live in HUD (thank you losing my job over cancers #2 and #3 in one year and due to the cancer treatment complications gap in my employment and age discrimination finding another full time job is proving to be much harder than I had hoped)  and get SNAP keeping below the $600 reporting minimum is important because otherwise my rent goes up $180/year ($15/mo) at $600 (and of course more if I get more - 30% of my income goes to rent in HUD) and my SNAP goes down by the same amount (or I could lose it completely depending on how much I order). 

This year it means 4 kids have a good (although not extravagant) christmas. I read elsewhere you have to have $2000/year in Vine requests to stay on Vine and I can't afford $50/mo more in rent since this isn't money, it is stuff.

I too had noticed they inflate the value of items when you request them (from about 20-30% depending on the item). While selling stuff (at a loss I am sure) I can probably make up the tax difference, the rent difference, and maybe the food difference I am not sure it is worth the hassle. That brings a new set of issues. 

So if we resell this stuff (well except what we actually need for kid presents and, in my case phone cords since the cat chews on the lightening end of cords if I forget to put it in a drawer) can we then count it as a business instead of a hobby since we are reselling? Or because we will be reselling at a loss that negates the "making a profit" most years business rule?  And would we then have to count what we got selling it as additional income even though it is a "loss" so to speak? I am confused.

I have a feeling I just went down a rabbit hole accepting this invitation and since this year is nearly over staying under $600 would be easy, but next year likely not (well I could but I had planned to use it for kid birthday and christmas presents). Were it not for public services (HUD, SNAP) it would be less of an issue but you have to report all income to them as you get it and that changes your benefits. And they hate you for having to redo your paperwork due to changing income. Then they retaliate trying to drive you out of HUD so they don't have to do interim rent determinations. 

I'd appreciate any advice anyone has.

[suPURDUEper]

This contains the main question I've been wanting to have answered.

As a business, what happens when I receive an item worth $100 and sell it for $40?  Does that mean it is a loss of $60? I would assume so.. and then the losses could end up equalling or exceeding the "income" of the value of the goods..   I wouldn't think you would also report the $40 as income because that is already reported as your $100-$40 calculation.  Or, to be more accurate, if you follow the rules to NOT sell until 6 months later, then do you have to be accurate at calcuating the depreciation of those items so that it wold no longer be $100-$40 but maybe $60-$40?  And then do you have to supply evidence to the depreciation?  If you do need to account for depreciation, then what about for the items that are never sold that would also depreciate? Do you need to deduct that depreciation as a business expenses?

[soupnazi02]

Well any deduction you would like to take would require you to claim it as business income, not hobby. 

This is a question that has been bothering me for some time. So we receive an item with an ETV of $100, which goes on our 1099-NEC as $100. At some point in the future we decide to sell this item, which will almost certainly be less than $100. If we are treating vine like a real business venture where we have a stream of products flowing in that we intend to eventually sell, then wouldn't the act of selling at a lower price generate a loss? I am probably either missing something crucial or have a simplistic understanding of tax code.

There is also a depreciation that happens from the services that we are providing. We have to use the product to review it, which in turn depreciates the value of that product. So what we are left with after providing our services is not the ETV that Amazon is reporting, it's something much less. So it does appear on paper that we are making all this revenue from participating in the Vine program, but the reality is we are left with used products that may or may not function as intended. I lost count of how many items I've ordered that turned out to be a bust, and we cannot return it, we have to eat it. Maybe it could be deducted, would have to file as a business to do so, and I am out of my league here, and probably turbo tax's as well. 2024 is going to be a fun year.

[DianeW777]

This program could easily be considered a hobby.  You are not engaged in the activity for a profit and you have no product to sell to customers since each product is used so that you can create a review for Amazon.  

The IRS may eventually give better guidance on this particular activity, but in the mean time there is no profit motive and you are being taxed on what Amazon has decided is the value of those products provided to you free of charge, essentially paying you for your review. 

• The Vine is a product review program created by Amazon to provide customers with honest and unbiased reviews. Amazon Vine invites its top reviewers to receive a product for free in exchange for a review. This incentive program benefits both the reviewer and the seller.

@soupnazi02 

[uglysquid]

As others have said, they don't hand out products in exchange for reviews.  You can get all the products you want, and review nothing.  There is no exchange of goods for services.

Amazon's Vine TOS says,

"We do not require that you write a review but we do take this into account when determining who the best reviewers are to keep in Amazon Vine."

If you receive promotional products with no expectation of anything in return, is that considered taxable income?  From what I've read, it is, they just aren't reported unless they're over $600 in a year, so that pen you got at the vendor's booth is not reportable, unless it's solid gold.

It's promotional giveaways.  It probably should be on 1099-MISC and Amazon appears to be reducing it's tax burden by fraudulently claiming we're paid contractors.  However, what I'd like to know, would it have made a difference to our bottom line if Amazon had reported it on MISC vs NEC?  What I'm reading says, probably not.  It looks like all 1099 income is taxed either at the 15.3% self employed rate, or as Hobby income (which I think I understand is just considered at your normal tax bracket?).  Generally, unless you have expenses related to Vine, hobby is supposed to be the cheaper (and more appropriate, regardless of the amount) option.

FWIW, I am not any kind of financial professional.  I just try to follow the logic of the fine print.

[SusanY1]

The IRS and Amazon concluded after much discussion that for most people, Vine activities are self-employment income.  Amazon isn't fraudulently reporting anything - they are doing what the IRS explicitly told them to do (around 2015).  Logic doesn't always come into play with taxes, unfortunately. 

While a review isn't a requirement, it's an expectation.  So, in essence, there's an exchange of goods for services. (This is how the IRS views it.)

The products are given with the expectation of a review, or they stop sending them.    Also on the side of the argument making it "self-employment" income is  that it is generally recurring "revenue" (after all you can get between 3-8 items per day).  You also select the items that you want - they're not random like a sweepstakes prize.  

Promotional items, sweepstakes prizes, and the like are also taxable income, but they are generally "other" income as there is nothing expected in return for them.  Something's expected in return for the items you receive through the Vine program, though, even if it's not required.  

For someone who starts the Vine program and drops out a week later, "other" income or hobby income may be easier to rationalize- but it's difficult to argue there's a "hobby" here and that the income is incidental to that hobby.  The IRS defines hobbies as "an activity that a person pursues because they enjoy it with no intention of making a profit".  

I do like to shop - but it's going to be an uphill battle for me to convince the IRS that it's a "hobby" to "shop" on Vine.  The main reason to do it is for the free stuff!  That's "profit", if not in the sense of cash in your pocket.  Even though I enjoy writing the reviews, I'm not sending the items back after I review them.  Therefore, I've provided a service in exchange for something of value. 

The IRS has audited many Vine participants who have chosen to reclassify the income as hobby or other income, and the IRS determines that it is self-employment income in that process nearly every (if not every) time.   By then there are penalties and interest on top of the tax. 

The determination of hobby income is fact and circumstance based, so there may be some isolated cases of Viners who qualify to report their income as a hobby.  It won't be the norm, though.  

I am a financial professional,  a tax professional, and a Viner.  The income is self-employment income in the eyes of the IRS most of the time, whether we like it or not.    It's better to report it this way than to end up with penalties and interest on top of the tax due.  

[soupnazi02]

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@SusanY1 wrote:

The IRS and Amazon concluded after much discussion that for most people, Vine activities are self-employment income.  Amazon isn't fraudulently reporting anything - they are doing what the IRS explicitly told them to do (around 2015).  Logic doesn't always come into play with taxes, unfortunately. 

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Sorry, but this is not correct and is spreading misinformation at best. Neither Amazon nor the IRS has the ability or authority to prepare the tax returns for others. This would be very illegal and I highly doubt that either one would engage in such behavior. 

[suPURDUEper]

I'm sorry. I missed the part where the comment mentioned Vine or the IRS preparing tax returns. Can you explain what the misinformation is?

[DianeW777]

You are correct.  There is no misinformation in the post by @SusanY1, on the contrary it's valuable and first hand experience.  Should an IRS review come about it will definitely look at factors such as time and product receipt volume to make a determination.  You can follow the guidance provided for your situation.

@soupnazi02 

[soupnazi02]

Preparing the tax returns by suggesting what type of income that participants in Vine have.  They said Amazon and the IRS had discussions and concluded that we have self-employment income. It is not for them to decide what type of income we have. 

[soupnazi02]

I was only referring to the part that I quoted in my response.