Reporting income

[ML89]

In July of this year I began giving online foreign language lessons. My clients pay me via PayPal. I anticipate I’ll make over $600.

Q1. Some of my clients have paid me using the “Friend and Family” option. I’ve asked them not to because I just don’t want to get in trouble, so they have stopped. I’m not sure if PayPal will include those specific “Friend and Family” option payments in the year-end 1099. Even if PayPal doesn’t include them, can I still report those payments as income or will this be suspicious to the IRS if PayPal sends me a 1099 with a lower amount (excluding the “Friends and Family” payments) but I report all payments?

Q2. If I happen to pick up a lot more clients towards the end of the year and find that I owe more than $1000 in taxes, will I be penalized if I didn’t make quarterly payments?

[Bsch4477]

Just keep good records of your income and report that amount. Yes, you might be assessed a penalty if your tax liability is greater than $1000. 

by Individuals Penalty if:

• Your filed tax return shows you owe less than $1,000 or
• You paid at least 90% of the tax shown on the return for the taxable year or 100% of the tax shown on the return for the prior year, whichever amount is less.