Let's start simply.
1. If you file a tax return for any reason, you must report all your income, no matter how small. If this is your only income, you must file a tax return and report it if your net profit (income minus expenses) is more than $400. You are expected to keep accurate business records of your income and expenses regardless of whether your clients and payers give you tax paperwork.
2. This is self-employment work. If you report it, you will prepare a schedule C to attach to your regular tax return. Schedule C lists your income and expenses and calculates your profit. This flows to the main form 1040 where it is combined with your other income and deductions to calculate your overall tax bill.
3. Self-employment requires Turbotax online Self-employment version which is the most expensive version of the program. However, if you earned less than $36,000 overall, you can use the IRS Freefile version of Turbotax which includes schedule C for free. If this was 2019 income, then bad news, the FreeFile version was turned off after the Oct 15 final deadline and the only way you can file is using the paid software installed on your own computer from a CD or download. But if this is for 2020, you have plenty of time to plan, and you can use the online version next year between January and April 15.
4. If you report $500 of income but no expenses, the extra tax is going to be about $60-$120, and you won't owe any penalties for not paying in advance. It will probably just reduce your normal refund.
5. If you don't report it, the IRS will probably not find out, since less than 1% of taxpayers are audited. But reporting it is the right thing to do.
