I Think I Made A Huge Mistake Joining Amazon Vine!

[ForeverGrateful]

Rose;

I am also very new to Vine, sounds like even newer than you. 🙂 

I wish I could give you piece of mind regarding your taxes since you are so worried about them.   Yes you will have to pay taxes, BUT ..... and someone else please correct me if I'm wrong, the fact that you said you have not had to file taxes for decades leads me to believe you either had no income or no taxable income.  SO your tax obligation for $15,000 MAY not be as 'gut wrenching' as you have been feeling.  I hope that is the case.  As one of the other post states you can setup a payment plan if needed.

I will let you know that the next question that you will have to figure out is HOW to REPORT the income (there is a post on Intuit about this but no definitive answer) https://ttlc.intuit.com/community/taxes/discussion/amazon-vine-1099-nec-how-do-i-report-income-and-a... -

GOOD LUCK Rose we are in the boat together. 🙂

[Opus 17]

Reporting Vine income is not complicated.  There are two options, depending on whether you classify it as a hobby or a business.  If a business, you can deduct expenses (if you have expenses), and you pay both income tax and self-employment tax.  If a hobby, you can't deduct expenses, but you only pay income tax, not self-employment tax.  Whether Vine is a business or hobby is a question for each taxpayer to answer based on their own facts and circumstances.  The IRS has some information here.

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

If reported as a business, you pay self-employment tax on net profits, no matter how much or how little other income you have.  But you might not pay much income tax, if you have very little other taxable income.  Again,  the exact answer will depend on each person's total financial circumstances. 

[ForeverGrateful]

Thank you so much for your insight !- I have concluded the same;  either the income is a hobby or a business.  I am leaning on filing it under hobby - BUT my amount in box 1 was a fraction of Rose's amount.

In an effort to get some reassurance for myself I called the IRS and spoke with six different reps over a 2 hour period and to quote what the rep told me when I asked about whether it is a hobby or business "I can't decide that for you, wish I had better information for you,  that is a gray area" - so basically same as what you said.

The next question I asked was IF I claim the income as SE income then, since I'm 'self employed' can I pay myself and deduct my pay from the income reported in box 1 of the NEC - I thought the answer would be a simple YES - but to make a very long story short she said "That is not a question for the IRS"

She ultimately said "it sounds to me that it's possibly a hobby, but then you can not deduct expenses"

I mentioned that I had seen some Vine members online that had over $30,000 dollars in 'income' - she then said 'that does not sound like a hobby'.-

These questions are for me AND Rose -

1. If we report the income as self employment income can we PAY ourselves, and then deduct our pay from the amount in box 1 of the NEC?

2. Could we make record keeping it SUPER simple and pay ourself per order?  I came up with the figure 15$ per order. (below in italics is SOME of what goes into a review)  As a 'business' I know you are required to keep 'records'.  I had MANY thoughts -  pay myself as a writer, a writer would get paid per word so I would have to record how many words in a review, I could count the number of photos I have taken? That way would be a job in and of itself.  I know Rose nor I have kept track of the hours we have spent 'looking' for an item to review, selecting the item to review, unwrapping, recycling the packaging, taking photos,  testing the item, possibly installing the item, uploading the review and uploading the photos, re-submitting reviews.  I asked the IRS about record keeping and their reply was ambiguous.

3. Does claiming the income as SE income make me a business?

BECAUSE:  – IAW Amazon’s policy: “Participation as a Voice by businesses or organization is strictly prohibited.” – Why would Amazon send something out  (1099-NEC) that would disqualify you from being a member?

Opus17- thank you for your time I know it takes effort to answer a post, insert links and SHARE your knowledge. I for one am grateful!

[VolvoGirl]

SORRY,    If you are filing a Schedule C for self employment or as a Single Member LLC or Sole Proprietor, etc. you cannot take a withdrawal or salary and include it as an expense on your tax return. You are not an employee of the business. You don't pay yourself or enter a salary or withdrawal for yourself. All the business income and expenses are your personal income and expenses in the first place. You just fill out a Schedule C. The net profit or loss is your income. If you have a net profit of $400 or more on schedule C you will pay SE self employment tax on it in addition to your regular income tax. It's all included on your personal 1040 form.

See Schedule C instructions page C-10 Line 26
Do not include salaries and wages deducted elsewhere on your return or
amounts paid to yourself.
https://www.irs.gov/pub/irs-pdf/i1040sc.pdf

[ForeverGrateful]

Thank you for the education AND the reading assignment 🙂  (Instructions for Schedule C) 

I am glad I answered 'NO" to all the questions on the IRS website on "How taxpayers can decide if it's a hobby or business"  The last question sealed the deal for me: "Do the taxpayer and their advisors have the knowledge needed to carry out the activity as a successful business? " 

The more I read the more I'm sure it is a hobby for me.

Thanks for your help

[Opus 17]

1. No, you can't pay yourself a salary and deduct it as an expense.

2. If you had expenses, they would be ordinary and necessary expenses for doing the work.  Since you can't pay yourself a salary, that's irrelevant.  Your expenses might be a portion of your computer cost and internet connection, if you keep a record or log of your online activity so you can determine what portion of your activity is business related.  I'm hard pressed to think of other expenses for this type of work.

3. That's up to Amazon.  

Also, understand that even if it was possible to pay yourself a salary and deduct the expense from the business, you then must give yourself a W-2, you must deduct and pay social security and medicare tax (like any other W-2) and report the salary on your tax return and pay taxes (like any other W-2).  (This is how a small business operates if it forms itself as an S-corporation.)  You would pay the same or more tax in the end.  

[ForeverGrateful]

Thank you SO MUCH for all the great information.  Considering all you have said and after reading VolvoGirl's suggested reading of the Schedule C I am 100 convinced I will be reporting the income as hobby income or as line j has it on the Schedule 1 for 2024  "Activity not engaged in for profit income" - All your points confirm to me I am not business - Thank goodness! - I do have a new found respect for business owners!

Thanks again SO MUCH!!!!