Taxes For Turkers - Reporting Self-Employment Income

[clickhappier]

From Apr 2015:

OB1W4N5 wrote:

" ... The only other income I had during 2014 was selling some stuff on eBay, and I've read/heard conflicting info about that, so I'll probably just try to meet with an H&R rep tomorrow. "​

There are some variables to consider in how your buying-and-selling activity gets characterized for tax purposes.
Straight from the horse's mouth: IRS.gov: Tax Tips for Online Auction Sellers

See also:
Washington Post: IRS wants a cut of online sales on eBay, Craigslist
Selling on eBay? Keep Eye on Gains - New York Times
Do I have to pay tax on stuff I sell on eBay? - Business - Answer Desk | NBC News
Taxes When You Sell Things Online | Nolo.com

 

[clickhappier]

From Apr 2015:

New misconception on Reddit tonight (4/12/15) that I hadn't seen come up before... and from a high earner who'd just posted nearly $4k in his last 45 days, no less.

" because I pretty much only did Hubs last year, I made like $2000 in earnings, and then roughly $8000 in bonuses. I was unsure about what was taxable because bonuses are all sent through email and extremely hard to keep track of all of them over a year.
I was just wondering because if you were working like a regular job, and got a random bonus, I believe that bonus is treated as supplemental income and is therefore taxed differently. "​

My response:

ALL income earned through MTurk is taxed the same. You should be reporting the overall totals as self-employment income. Bonuses ARE included in the annual totals MTurk provides to you on the dashboard, if you didn't keep sufficient external records. The arbitrary means which different requesters may choose to use to allocate the pay within the website has no bearing on its income status, as it is all directly related to work you performed.

"Bonuses" on MTurk are not the same as a "bonus" a W2 employee might receive, but those are not taxed differently from the rest of the W2 employee's income either. It may seem that way when you receive the check, but that's a matter of the *withholding* method the employer chose to use to make it simpler for them, and the difference will get settled out when you file your taxes and all your W2 income gets treated the same.

I posted a bunch of tax tips on Reddit here and here. And I've made many additional tax-related posts on MTG throughout this thread.

If you haven't filed your 2014 taxes yet, you need to do so, you have 3 days left... read those links and do it right. $10,000 of self-employment income is way past time for that. And if you have already filed for 2014, it sounds like you probably need to file an amended return asap to correct it. And with these kind of earnings continuing, you should probably start making estimated quarterly payments for 2015 - the first one of those is due April 15, same as the 2014 annual filing.

 

[clickhappier]

From May 2015:

turk14 wrote, regarding a point in my post Self-Employment Tax Tips Key Points - start here:

" Can you please explain point 8? Thanks! "

" You also don't have to do estimated quarterly filings if your total still owed at annual filing time is never $1000 or more for two years in a row. For example, you don't have enough withheld from your W2 the first year to cover $10,000 in self-employment income, and you owe $2000 more tax at annual filing time. If you correct it next year and only owe $200, you're okay. "​

If you were turking while also having a full-time/part-time 'regular' job, which pays you as an employee with taxes being automatically withheld from your paychecks, then you could have that job's payroll department start taking out more for taxes throughout the year to cover the amount of extra taxes you would've otherwise ended up owing for the turking. People who are only earning self-employment income don't have that option, so unless you go get a regular job before the time comes, quarterly payments is the only thing you can do once you've used up the two-year over-$1000-owed 'grace period'.

 

[clickhappier]

From Jun 2015:

turk14 wrote:

" ... I filed my tax return via MTurk and this is what it shows up on IRS"Where's My Refund" page. It has been more than 21 days. I would greatly appreciate your help. Thank you. "

"Your tax return is still being processed.
A refund date will be provided when available.

Please read the following information related to your tax situation:

• Tax Topic 152, Refund Information

Please Note:
For refund information, please continue to check here, or use our free mobile app, IRS2Go. Updates to refund status are made no more than once a day. "​

It'll be done when it's done; 3 weeks is the typical processing timeframe for returns filed online, but sometimes it takes longer than others, and special-case situations like late filing are likely to slow things down. You can call the IRS at 800-829-1040 Mon-Fri if you want to ask questions.

If you're not getting a refund because you had to pay, I don't know if "Where's My Refund" (WMR) will ever change from that 'being processed' status (I've been curious about that and haven't managed to dig up an answer online yet). Sometimes WMR doesn't even update promptly if you are receiving a refund; I found an example of someone saying yesterday that they received their refund two days ago and WMR still said it was 'being processed'. Also, looks like a lot of people are noticing processing delays this year due to issues with health insurance coverage paperwork. And there are additional overall delays due to the IRS being understaffed due to budget cuts, and having to deal with a surge in fraud/identity-theft this year.

 

[clickhappier]

From Sep 2015:

Tax tidbit I posted on Reddit 9/6/15:

As a self-employed person, you have to file if you earn at least $400 in a calendar year.
If you're still being claimed as a dependent by your parents, that doesn't affect this. It basically just means they get a discount on their income tax for having a dependent, that otherwise would've gone towards reducing your income tax if you weren't still being claimed and you have more than several thousand dollars in income. You'd owe the same self-employment tax either way.

 

[clickhappier]

From Nov 2015:

inkyb wrote:

" Hello, I've done some reading in the thread and have a question or two.

Theoretically, if I'm having someone help me turk, as in: finding the best hits for me, putting them in the que, giving feedback, etc., and I pay them a fee. Since I am, in the eyes of the IRS, a self-employed LLC, can I write off these 'independent contractor fees' during tax time?

It appears that I should be able to, and if the amount that I pay exceeds $600, then I must issue some type of form?
Any insight on this? Thank you guy. "​

Yes, from what you've described, you would be able to deduct that as a business expense (meaning you don't owe taxes on that amount of your income, not that your amount of taxes owed is reduced by that amount). Different tax software offers different premade categories in which to categorize such expenses; try to pick one of those, but can usually also make your own if none of them fit.

And yes, you would have to generate your own 1099-MISC form to this person if you pay them $600+ in a calendar year... *unless* you pay them solely through a 1099-K-affected payment system such as Paypal and Google Wallet (and Amazon Payments, but they unfortunately killed their person-to-person payments feature about a year ago, so isn't an option for this situation). You don't file 1099-MISCs for payments going through 1099-K-able systems, to avoid potential doubling-up (though most people are well below the 1099-K thresholds).

But small correction: you're a self-employed sole proprietor (unincorporated business); an LLC is a specific type of incorporated business, that's a whole other level of paperwork.

PS: Interesting idea, don't think I've heard anyone talk about an arrangement quite like that before...

 

[clickhappier]

From Nov 2015:

headcage wrote:

" If amazon doesn't send a 1099-k form, is there an easy way to know how much you've earned? It's my first year so I'll just have the number on my dashboard, but in the future do you just look at all the amazon payment transactions and add them up? What about if you've used any money to get amazon gift cards? "​

Like Desertdarlene, I have a spreadsheet, but the easiest thing to do is wait for Amazon to post your per-year total earnings on your MTurk dashboard around a month-ish after the end of each calendar year. There's some posts about this in this thread around the end of last year. That's the only place other than your own hypothetical spreadsheet where earnings you sent to your gift card balance would be included anymore afaik, since they stopped running gift card transfers though Amazon Payments earlier this year.

 

[clickhappier]

From Dec 2015:

2015 tax software

The new tax software for the 2015 calendar year (taxes due April 15, 2016) has been available on Amazon since mid-November, and it's already been on sale below MSRP for much of December. These are the Deluxe version (the version most turkers would need) links for H&R Block:

For people who live in one of the states that don't have a state income tax:
H&R Block 2015 Deluxe Tax Software + Refund Bonus Offer - PC/Mac Disc - MSRP $34.99, current sale price $24.99
H&R Block 2015 Deluxe Tax Software + Refund Bonus Offer - Windows Download - MSRP $34.99, current sale price $24.99

For people who live in states that do have a state income tax:
H&R Block 2015 Deluxe + State Tax Software + Refund Bonus Offer - PC/Mac Disc - MSRP $44.99, current sale price $32.99
H&R Block 2015 Deluxe + State Tax Software + Refund Bonus Offer - Windows Download - MSRP $44.99, current sale price $32.99



JAN 31 UPDATE!!:
If you don't mind using the web-based version instead of the desktop software version, I discovered that the United Way charity is sponsoring free access to H&R Block Online for *everyone* with a total income under about $60k, *including people with self-employment income* (who are usually excluded from free tax-filing-related stuff). Jqkill and sinon both were able to successfully file their taxes with it for free, including proper Schedule C self-employment reporting.

Some turkers have also successfully used taxact.com, but it will cost something for most turkers, and I've heard its q&a/interface isn't as easy to work with as H&R Block's is.

TurboTax is great too, except that it will be more expensive for the necessary version of it than the competitors. Their 'free' online version will lure you into entering all your info and then surprise you with an upgrade fee because you're self-employed.

 

[clickhappier]

From Dec 2015:

Dezdiaz37 wrote:

" Hi, I made a little over $1,000 this year on Mtrk and I obviously plan to report it but my husband and I shally joint file through TurboTax software, does anyone know how I will report my Mturk earning in a program like this? Thanks in advance! "​

As part of your joint combined tax return, you'd have a Schedule C (C-EZ) and Schedule SE in your name, with that ~$1000 as your business (self-employment) receipts/profit total, entered without an associated 1099-MISC. The taxes owed on it will just make a small dent in the refund he'd presumably be getting from having a full-time W2 job.

 

[clickhappier]

From Dec 2015:

From today's [12/30/15] full-of-tax-talk MTG daily thread...

robert wrote:

"... does anyone know a good general how to do taxes resource that they've found helpful? i have like 10 different sources of income and a few other complications and i don't wanna pay someone to work thru the mess "​

Gradually read through my tax posts (and if you're unfamiliar with the basics, start with the three beginner's guides linked in my first post Self-Employment Tax Tips Key Points - start here). It is a lot of stuff, pace yourself and reread as needed. Be aware of how soon can you file, what paperwork should you be waiting for?, and what you need to add up for yourself from your own records because that source of income won't be sending you paperwork. Buy some good tax software and go through all the questions the software asks you. It may take going through the questions more than once before you get the hang of where to put everything (like where to enter self-employment income without a 1099-MISC in H&R Block software).

 

[clickhappier]

From Jan 4, 2016:

Amazon posted the 2015 earnings-by-year totals on people's dashboards today, Jan 4, 2016... much earlier than last year, and I think it might only include things that were approved through Dec 31, 2015 (thus them being able to post it earlier)... since I stayed away from slow-approving things in the latter part of Dec, all of my stuff from 2015 has already been approved; but their total is nearly $10 less than the total I keep track of myself based on when I submitted the HITs rather than when they approved, which I'm guessing is due to things that approved Jan 1-3 (and beyond, for other people) not being included. I don't know exactly what they did in previous years (we had thought they waited until late Jan-early Feb to be able to include everything submitted through Dec 31 once it had all had time to approve), and their little "what's this" pop-up does not bother to clarify. For the few who've both earned enough and transferred often enough to trigger a 1099-K from Amazon Payments, I think that should reflect the total of the amounts you transferred from MTurk to AP during calendar year 2015 (through Dec 31), which may and very likely will differ from the MTurk dashboard amount.

 

[clickhappier]

From Jan 8, 2016:

My response to an MTG PM asking about deductions:


How the heck is your vehicle involved in turking? lol. HITs involving going somewhere in person are extremely rare. I have deductions for business vehicle use, but only because of other non-turking work I do. If you have specific detailed records of your mileage each time you drove somewhere for a self-employment-specific reason, as well as records of your car's total mileage through the entire year (odometer at start of year and odometer at end of year), you do get to deduct the IRS business mileage rate per mile ($0.575 per mile for 2015), which is much higher than gas costs, intended to cover the proportionate share of the eventual maintenance expenses those miles led to in the future. You don't get to deduct all your vehicle-related costs unless the vehicle is used exclusively for business purposes, and you have another personal vehicle to make that believable. If you had a ton of vehicle-related expenses, then you could deduct the share of them that is proportionate to the percent of miles driven for business vs non-business use (which includes personal *and* any W2-job commuting, those aren't deductible miles), but most people without extremely expensive vehicles are better off with the per-mile deduction than the percent of actual costs.

If you have a computer used solely for self-employment work (the vast majority of turkers do not), you can deduct its costs. But if it is mixed-use, then it has to be handled like the vehicle situation - you'd need detailed logs of how many hours you were using it for strictly business use, how many hours for personal use, and then deduct the percent of its costs proportionately. Likewise if you have a second internet service used only for self-employment work, you can deduct its costs, but mixed-use means you need the evidence for how much of its use was business vs personal.

I have a post in the tax thread that mentions some stuff about how the home office deduction works already... the vast majority of turkers don't qualify to legitimately take that either, because it has to be a strictly marked-off space in your home (as in, if it's not a separate dedicated room, you're supposed to literally make a line on the floor around it with tape) that is only used while you're working (where one might have a business-use-only computer, or else would be moving a laptop back and forth to a different desk outside of one's strict 'work hours') for self-employment purposes, and then one would get to deduct the percent of rent/mortgage payments and electricity bills proportionate to how many square feet are in that dedicated space vs the total square feet in your home. Home office deductions have been the trigger for quite a few people to get audited over the years, as they know most people working from home aren't working in an appropriately dedicated-use space (when auditing for that, they've made people send in photos and floor plans, or actually come look in person sometimes).

Student loan deduction is only for interest; your loan company will send you a tax form stating how much (if any) you are allowed to deduct for that each year. You can deduct qualifying education expenses up to $4000 per year, which includes tuition/fees and textbooks, but there's some more complexities to read. Both of these are not the same kind of deduction as the other stuff mentioned above, though - they are only to reduce the part of your income, above the standard deduction and personal exemption amounts, on which you would owe actual *income* tax. The various hypothetical business expense deductions are to actually reduce what your taxable self-employment income is, on which you would owe both income tax and 'self-employment tax' (employer+employee's shares of Social Security and Medicare contributions).

If you're going to be earning that kind of money all from self-employment, you're probably going to owe several thousand dollars this time. And although you're not required to until you've had a second year in a row like that, you should probably go ahead and start making quarterly estimated prepayments (search inside the tax thread for 'quarterly', several posts about that too) ASAP if you plan on keeping on at that pace.

 

[clickhappier]

From Jan 8, 2016:

bxpretzel wrote:

" Regarding this the difference between what Amazon says my 2015 total is and my recorded 2015 total is $16.48. That doesn't even include the 4 HITs I still have pending from December. Which is safer to go with for 2015, my own total or Amazon's total? If I should go with Amazon's, does that mean I should add the excess to my new 2016 running total?

I thought they'd wait until January 30-31 until all HITs from December have been auto approved. I'm guessing Amazon isn't going to update the 2015 total to include those HITs once they approve. "​

If you feel confident you've kept accurate records yourself (including bonuses), you can use your records (I do). If you've used the MTurk dashboard number in previous years, probably fine to just stick with that. Those who pass the 1099-K thresholds will end up getting a different number on that which won't match the dashboard number either, I expect. There's just too many tiny moving parts that can be counted in different ways with this stuff. The goal is to not have bits fall through the cracks between years, as best as possible; it's a risk with changes in how to count them, but with the lack of transparency and consistency in how Amazon's coming up with the dashboard numbers, those may not be perfect either. (I'd think whatever they didn't include in this year's total will end up in next year's total, but who knows...) Do your honest best and save documentation of what you're basing your reported numbers on one way or another, is all you can do.

 

[clickhappier]

From Jan 11, 2016:

inkyb wrote:

" Just did my 'estimated' taxes for Mturk Earnings for 2015..
Looks like I better start selling my organs. "​

For those who didn't do quarterly prepayments and get surprised by a big tax bill they didn't save up for, the IRS offers installment plans.

 

[clickhappier]

From Jan 19, 2016:

Kentucky Fried Walrus wrote, about H&R Block software versions:

" Just a heads up on this, to get Advance Schedule C guidance for self-employment sections I had to buy the Premium version. It's only about $7 more than the Deluxe version but for someone that was totally new to this I'll say it was worth it. I bought the deluxe version at 1st and their free tax assistants informed me I had the wrong version for self employment. Had to call Amazon and talk them into giving me a refund which wasn't easy on a digital download, but they did it anyway and I just ordered the Premium version. "​

Yeah, the Deluxe version can fill out all the stuff just fine, but if you catch a sale where it's so little more to upgrade to Premium, it does give extra help.

 

[clickhappier]

From Jan 20, 2016:

spottmonsta wrote:

" I'm filing through my taxes using the HR Block premium. Since I have a full time job and turk on the side, is it possible/ more beneficial to claim turk wages as a hobby as opposed to my own business? "​

If you've bothered to register here [on MTG] (over 6 months ago at that) and ask about taxes, pretty good odds this isn't a hobby, heh. More importantly: hobbies are activities you *lose* money on, businesses (self-employment) are activities you (at least try to) earn a profit on.

See points 1 and 2 in my first post self-employment tax tips key points - start here, and MTurk is Self-Employment Income, not 'Other Income'.


And Desertdarlene added:

" Generally, you report it according to IRS rules. If you are doing something regularly and consistently, the IRS would probably consider it a business. If this is something you do now and then or on the side, but not regularly, then it would probably be considered a hobby. It's up to you and whether you can prove it's a hobby to the IRS if you get audited.

A benefit to claiming it as a business is that there are some deductions you can take when you report business income that you can't take if you report it as a hobby. Plus, your SE taxes count towards your Social Security earnings, while hobby income does not. "​

 

[clickhappier]

From the Jan 27, 2016 MTG daily thread:

turker wrote:

" we don't get any refund back of our mturk tax right? we have to pay it to the IRS and then we don't get any of the mturk tax back? "​

People aren't automatically entitled to 'refunds'. People who have traditional jobs have taxes withheld from their paychecks year-round, and then if more was withheld than they actually end up owing, they get the rest back. If you've been sending in quarterly estimated prepayments, as a high earner should be, you'll get a refund if you sent in more than you actually end up owing.

 

[Ashley88]

https://www.irs.gov/uac/Newsroom/Dont-Miss-the-Health-Insurance-Deduction-if-Youre-Self-Employed

I am sure many people already know about this, but I just learned this today. You can get a really good deduction if you are self-employed and have the ACA health insurance.

I have the Affordable Care Act aka Obamacare aka Healthcare.gov insurance.

My sole income is mturk and my husband's employer does not offer spousal coverage. So, I assumed that I qualified for that deduction.

I filled out my taxes today and went from owing $1100 to $440.

 

[clickhappier]

You can get a really good deduction if you are self-employed and have the ACA health insurance.

It can definitely help, just note that you can only deduct the portion of the premiums that you actually paid out of pocket, not the part that you received subsidies to pay for (if any).

Once it's ready, will be merging this into the tax thread I'm still piecing together in a staging area.

 

[Ashley88]

It can definitely help, just note that you can only deduct the portion of the premiums that you actually paid out of pocket, not the part that you received subsidies to pay for (if any).

Once it's ready, will be merging this into the tax thread I'm still piecing together in a staging area.

Thanks for the reply! I unfortunately didn't receive any subsides so hopefully I did it correctly

I've been reading your thread from last year's MTG forum posts it's helped so much!!