Payment for photography

[Ntrammell56]

My wife does photography on the side and her clients mainly pay her via Venmo. She’s made more than $600 total, I’ve heard that you only need to file the 1099 if you’ve made more than $600 from 1 client specifically. Example, most clients have not paid more than $600. Four clients have paid $615 each. Do we just need to claim the $615x4 on the 1099 form? 

[KochuK]

Hi Ntrammell56, thanks for posting question.

The Venmo payments fall into the Third-Party Payment Network transactions. For tax year 2022, if the gross payments for goods or services exceeds $600, Venmo will issue a Form 1099-K for the TOTAL AMOUNT (amounts greater than $600, amounts less than $600 added together).

In your income tax return, Schedule C Profit or Loss from Business, your gross revenue includes cash, checks, 1099-K, 1099-Misc etc. Your gross revenue should be no less than the 1099-K amount if there is no other revenue source.

Below is for your information.

General FAQs on Payment Card and Third Party Network Transactions

https://www.irs.gov/payments/general-faqs-on-new-payment-card-reporting-requirements

Hope the above clarifies.

[Ntrammell56]

I also read that if it constitutes as a hobby, which it is more so of a hobby that she does receive money for, if it doesn’t make up half of your annual income then you don’t necessarily need to report it on taxes. 
Is that correct? 

[Opus 17]

If you file a tax return for any reason you must report all your income, no matter how small an individual item might be.  This includes hobbies. 

The IRS test for hobby or business is here.  There's no set dollar amount, it depends on intent and actions.

https://www.irs.gov/newsroom/heres-how-to-tell-the-difference-between-a-hobby-and-a-business-for-tax...

If this is a hobby, you report the gross sales proceeds as taxable hobby income, which is reported as "other income" on the tax form.  You can't deduct any expenses.

If this is a business, you report the gross sales on schedule C, deduct ordinary and necessary expenses, and pay income plus self-employment tax on the net profit.

[Hal_Al]

Q.  I’ve heard that you only need to file the 1099 if you’ve made more than $600 from 1 client specifically. Is that correct?

A. No.  All income is reportable, not matter how small the amount or how many people paid you. The $600 rule applies to the 1099 issuer. If they paid you less than $600, they are not required to issue you a 1099.  There is no $600 rule for you. You must report all your income, whether you got a 1099 for the income or not. 

Q. I also read that if it constitutes as a hobby, which it is more so of a hobby that she does receive money for, if it doesn’t make up half of your annual income then you don’t necessarily need to report it on taxes. Is that correct? 

A. No. All income is reportable, not matter how small the amount.

[VolvoGirl]

That is self employment income.

To report your self employment income you will fill out schedule C in your personal 1040 tax return and pay SE self employment Tax.  Here's a Schedule C  https://www.irs.gov/pub/irs-pdf/f1040sc.pdf

You can enter Self Employment Income into Online Deluxe or Premier but if you have any expenses you will have to upgrade to the Self Employed version or use any of the Desktop CD/Download programs.

How to enter self employment income

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

You will need to keep good records.  You may get a 1099NEC at the end of the year if someone pays you more than $600 but you need to report all your income no matter how small and if you don't get the 1099NEC.

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.   

After it asks if you received any 1099Misc or 1099NEC it will ask if you had any income not reported on a 1099Misc. You should be keeping your own records.  Just go through the interview and answer the questions.   Then you will enter your expenses.

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.  

The SE tax is already included in your tax due or reduced your refund.  It is on the 1040 Schedule 2 line 4 which goes to 1040 line 23.  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

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center

Pulication 334, Tax Guide for Small Business

http://www.irs.gov/pub/irs-pdf/p334.pdf

Publication 535 Business Expenses

http://www.irs.gov/pub/irs-pdf/p535.pdf