Taxes For Turkers - Reporting Self-Employment Income

[MerryLou]

Edit: I think I got it.

 

[sinon]

So I filed like months ago. Today wanted to review it so I downloaded a copy of my return. I know ya'll say to get a tax expert, but I wanted to confirm if anyone has had this happen before I lose my mind.

Looking at my return, we're a little stumped. I filed exactly as I should have and as I have previous years. My income from Mturk was meager, around 2k, put under Schedule C as normal. This was put under Federal. The state tax return was $0. The only income I had was from mturk and stuff, no retail job etc. But H&R I think did ask me if my income was less than previous year filed and I did say yes. And from there it did ask me to import my last tax return for them to verify, so I did.

Somehow from all of this, it's saying my gross income is like $8,000 even though it was submitted as everything $0 for state.

Is this something H&R just did on its own? Because literally the only things I submitted to it were my college tax form, my health 1095-B, and the Schedule C with the 2k as the only income.

 

[Zacharias]

So I filed like months ago. Today wanted to review it so I downloaded a copy of my return. I know ya'll say to get a tax expert, but I wanted to confirm if anyone has had this happen before I lose my mind.

Looking at my return, we're a little stumped. I filed exactly as I should have and as I have previous years. My income from Mturk was meager, around 2k, put under Schedule C as normal. This was put under Federal. The state tax return was $0. The only income I had was from mturk and stuff, no retail job etc. But H&R I think did ask me if my income was less than previous year filed and I did say yes. And from there it did ask me to import my last tax return for them to verify, so I did.

Somehow from all of this, it's saying my gross income is like $8,000 even though it was submitted as everything $0 for state.

Is this something H&R just did on its own? Because literally the only things I submitted to it were my college tax form, my health 1095-B, and the Schedule C with the 2k as the only income.

That doesn't sound correct. Your Adjusted Gross Income (AGI) shouldn't be higher than the combined amount you report earning from all sources.

There's not enough information in the post to say how $2,000 would take a wrong turn into $8,000. Were your mturk earnings written down as $20,000 instead of $2,000 by accident? I could see that making your taxable income on line 43 show up as somewhere around $8,000.

If you want to share more specifics about it, such as what is reported on different line #'s of your 1040 it is possible we could track down where it went kaput. Just keep in mind I'm some guy on the internet and not a tax professional myself.

 

[sinon]

That doesn't sound correct. Your Adjusted Gross Income (AGI) shouldn't be higher than the combined amount you report earning from all sources.

There's not enough information in the post to say how $2,000 would take a wrong turn into $8,000. Were your mturk earnings written down as $20,000 instead of $2,000 by accident? I could see that making your taxable income on line 43 show up as somewhere around $8,000.

If you want to share more specifics about it, such as what is reported on different line #'s of your 1040 it is possible we could track down where it went kaput. Just keep in mind I'm some guy on the internet and not a tax professional myself.

Hmm, looking at my records it's written in correctly as $2,105 (was rounding that in the other post). The $8,000 bit shows up under the state filing only, which I entered everything as $0. The only time I put in an income was under Federal for $2,105. I got an EIC and an American Opportunity credit but those were meager, $384 combined so I don't think this impacted it.

Somehow under my Federal (for tax summary) it's listing $10,400 in total deductions even though when I filed, I did not list or claim anything. I had nothing to deduct. Thinking of it this way, I'm wondering if something absolutely bonkers happened. Just not sure what to make of these numbers when I did not enter any of this myself...

It's basically stating on the state part under line 1 that the Federal Taxable Income from my 1040 is $8,444. But when I go to the 1040 it says the adjusted gross income is $1,956...

I'm not sure what other lines would be of help in this, but I appreciate your time I might have to ask H&R block.

 

[Zacharias]

$10,400 is the total of the standard deduction for singles ($6,350) and the personal exemption ($4,050). As long as you aren't being claimed as a dependent, both should apply to you.

If standard deduction and personal exemption are greater than your adjusted gross income (AGI), then your taxable income should be entered as $0 on line 43.

Is it possible that a -$8,444 was entered on line 43 instead of $0? Since that number is supposed to be zero or positive, maybe the state forms imported the -$8,444 but didn't have a function to keep it negative (since the number there shouldn't be negative).

The storyteller in my head says that this would make total sense of what happened. If you are single and claim yourself then the math lines up perfectly for there to be an $8,444 error.

Summary assuming you are single and no one else claims you as a dependent:

Line 43 on your form 1040 should be $0. Then this number should be used as your taxable income that the state is asking for.

 

[sinon]

$10,400 is the total of the standard deduction for singles ($6,350) and the personal exemption ($4,050). As long as you aren't being claimed as a dependent, both should apply to you.

If standard deduction and personal exemption are greater than your adjusted gross income (AGI), then your taxable income should be entered as $0 on line 43.

Is it possible that a -$8,444 was entered on line 43 instead of $0? Since that number is supposed to be zero or positive, maybe the state forms imported the -$8,444 but didn't have a function to keep it negative (since the number there shouldn't be negative).

The storyteller in my head says that this would make total sense of what happened. If you are single and claim yourself then the math lines up perfectly for there to be an $8,444 error.

Summary assuming you are single and no one else claims you as a dependent:

Line 43 on your form 1040 should be $0. Then this number should be used as your taxable income that the state is asking for.

Looking over the form and line 43, it shows $0. It is possible this -$8,444 can happen but I can't see it?

Ay yi yi taxes and numbers give me a headache.

 

[Zacharias]

Looking over the form and line 43, it shows $0. It is possible this -$8,444 can happen but I can't see it?

Ay yi yi taxes and numbers give me a headache.

If line 43 is $0 and the state form asks you to use your taxable income then it should also be $0. Which state are you filing in?

 

[sinon]

If line 43 is $0 and the state form asks you to use your taxable income then it should also be $0. Which state are you filing in?

That's what I figured, and how I filled out the forms on H&R but not how it appears sadly

State is Colorado but it's a Part Year because I moved.

 

[Zacharias]

That's what I figured, and how I filled out the forms on H&R but not how it appears sadly

State is Colorado but it's a Part Year because I moved.

Yep, it should be $0 on line 1 of the Colorado form. If that caused you to owe taxes in Colorado, you'll probably want to file an amended return to get that money back. Either alert H&R Block if they have a guarantee to get things rights or you could always file it on your own.

 

[sinon]

Yep, it should be $0 on line 1 of the Colorado form. If that caused you to owe taxes in Colorado, you'll probably want to file an amended return to get that money back. Either alert H&R Block if they have a guarantee to get things rights or you could always file it on your own.

Ahh, that's what I feared

Thank you for all the advice and info! I can get this sorted out now that I understand the problem lol

 

[Whale1231]

Hey all so currently filing and i'm wondering if i am just inputting wrong or if this just sounds normal. I made about 3.7k from Mturk last year and have put in all my info through a Schedule C and through myfreetaxes.com's H&R block. It is showing federal wise that i would be owing around 500 Dollars but everything i have read has told me i shouldn't be paying anything for that amount. Sorry if i just misread somewhere or didn't understand. This is my first time filing.

 

[Zacharias]

Hey all so currently filing and i'm wondering if i am just inputting wrong or if this just sounds normal. I made about 3.7k from Mturk last year and have put in all my info through a Schedule C and through myfreetaxes.com's H&R block. It is showing federal wise that i would be owing around 500 Dollars but everything i have read has told me i shouldn't be paying anything for that amount. Sorry if i just misread somewhere or didn't understand. This is my first time filing.

You probably don't owe any "income" tax. However, one of the bummers of self-employment work is that we still have to cover both the employer and employee portions of payroll taxes which amounts to about 15.3% of self-employed earnings. Unlike the income tax, there is no deduction when you file taxes to reduce the amount of self employment tax owed.

In your case of $3,700 in schedule C earnings, $500 is right in the ballpark of what you would owe for that self employment portion.

 

[Nuramazing]

You probably don't owe any "income" tax. However, one of the bummers of self-employment work is that we still have to cover both the employer and employee portions of payroll taxes which amounts to about 15.3% of self-employed earnings. Unlike the income tax, there is no deduction when you file taxes to reduce the amount of self employment tax owed.

In your case of $3,700 in schedule C earnings, $500 is right in the ballpark of what you would owe for that self employment portion.

As a "plus" if you don't get claimed as a dependent by anyone I think you could get something back as earned income tax credit. And you might get a little bit back from your state (but lol, mine was like $15).

 

[Deleted member 4195]

Quick Links to Clickhappier's Tax-Related Posts:

Since June 2014, I've spent a ridiculous amount of unpaid time trying to help turkers understand tax-related topics. There's a lot here to read, but this condenses years of my reading a whole lot more, and more complicated, material.
Try the 'feeling overwhelmed' getting-started summary if you're hesitant.

Hey, so I don't even know if you still look here, but I really need some help. I will pay you to just go through a free tax software and write down exactly where I'm supposed to fill in. I know credit karma has one, and I assume you probably know of a better one. can't really afford to spend hundreds on HR block.

Thanks!

 

[SleepyMcTurk]

Hi, just checking that I didn't goof on something here.

Should the United Way H+R Block filing still be free? Ended up with premium or something trying to get a schedule C. Wanted to make sure I didn't do something wrong. (If so does anyone have another easy tax filing that actually is free?) Thank you, sorry if I'm being a dummy.

 

[ronclark03]

This is a summary of the important things to know about self-employment taxes for turkers, which I originally wrote and posted on on Reddit in June 2014 to address the years of proliferation of inaccurate tax-related comments. I made a few additions to it after its original posting, which are in brackets.

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[Addendum: For anyone entirely unfamiliar with taxes, you would probably get more out of my taxes posts after you get a grasp of the basics with articles such as How to Do Your Taxes for Beginners | The Art of Manliness, Tax Preparation for Beginners | Learnthat.com, and Income Tax Basics - FindLaw (note that these don't adequately address the ways self-employment earnings change things, see my posts for more about that).]​

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1. Everyone who earns self-employment income should be filing a Schedule C [(or C-EZ; your tax software will put you in the right version for you)] form to report !MTG all [(there is no $400 or $600 'minimum')] of those earnings (regardless of whether you receive 1099-MISC forms for all of it or not) with the annual 1040 form. [And it will need to be the full Form 1040; having self-employment earnings means you're not eligible to use 1040EZ or 1040A instead.]
2. The only exception is if you only earn a very small amount of money from a casual one-off gig not related to your primary occupation(s) and similar gigs are not intended to be an ongoing thing, you can report that as 'Other Income' on the 1040 (and not have to pay the extra double FICA on it); for example, your neighbor paid you $20 to dog-sit for a week once (or you tried mturk for a couple weeks, earned $20, and then got bored with it and don't come back the rest of the year), and you only did it as a one-time thing, not as the start of a pet-sitting side business. (The kind of income appropriate for 'Other Income' filing is generally at such a low level and undocumented nature that most people who have income that could've/should've been filed this way don't report it at all.)
3. Everyone who files a Schedule C is considered to be self-employed as the owner of a business in the eyes of the IRS. This is regardless of whether you have incorporated (Inc/Co/LLC), have an Employer Identification Number (EIN), have a local business license, or have filed a local Doing Business As assumed name declaration. You are by default a sole proprietor business operating under your own first and last name, your own SSN, and from home.
4. Your primary place of business being based at home does not mean you necessarily can or should actually use the 'Home Office' deduction on your Schedule C (a deduction for a percentage of your rent/mortgage and such, based on % of your home's sq ft dedicated to the home office). The reason this deduction is kind of infamous for increasing the chance of an audit is because it is supposed to only be used for an office space which is clearly demarcated from the rest of the home and used only for the self-employment business. This is not the case in most people's homes - people usually don't have a separate computer on a separate desk, either in a dedicated room or with a line of duct tape surrounding the area on the floor, that they and other family/friends/roommates never use for personal activities when not in use for working on the self-employment business. My primary source of income for the past decade has been home-based self-employment, and I have never used the 'Home Office' deduction, because I don't have a dedicated home office space.
5. This is unlikely to be the case for mturk work, but even without taking the 'Home Office' deduction, any other expenses you incur that are dedicated to business use (office supplies, shipping, relevant professional membership/subscription fees, etc) can be deducted on Schedule C. One way this could apply to mturk is if you get really into transcription and want to buy one of those special foot pedal things serious transcriptionists use. If the self-employment involves driving, you can deduct the ~$0.50ish per mile (rate changes regularly, search for 'IRS mileage rate') driven for business purposes, if you keep detailed records of all business mileage and the vehicle's starting and ending odometer totals for the year.
6. Schedule C deductions directly reduce your taxable income. As a made-up example, if you had $3000 in self-employment income, and $200 in deductible business expenses, you'd pay taxes based on a net income of $2800. This doesn't mean you pay $200 less in taxes.
7. If you have a W2 job where you have enough withheld to cover any taxes on your self-employment income (income tax, and double FICA tax - the employer and employee contributions to Social Security and Medicare), you don't have to do estimated quarterly filings; the refund you would've otherwise received from those W2 withholdings will first go towards paying the taxes owed on the self-employment income.
8. 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.
9. If you do have to or choose to file quarterly estimated taxes, the intent is that the IRS wants to get the money they're owed throughout the year (as it does from W2 employers), and it's considered late if only paid at the annual filing. [For those who are paying estimated taxes, the prior-year safe harbor is the easiest way to determine how much you need to pay.] The consequences of owing more than the allowed amount is generally a small penalty and interest on the owed amount, as it is for annual-only filers who don't pay an owed amount by April 15 (even when someone 'files an extension', it's only an extension on finishing the paperwork, not an extension on paying by the due date).
10. You don't need to buy the 'Deluxe' or 'Home & Business' version of your tax software to do self-employment filings. Any version you already prefer to use will include the ability to do all tax forms, the more expensive versions just provide additional guidance. The only exception is the online 'free filing' services, which are only free if you only need to file a 1040-EZ (anyone filing a Schedule C has to move up to the non-'EZ' full 1040). [UPDATE: This has changed as of tax year 2014 (filing in 2015)! TurboTax now no longer files Schedule C unless you buy the $100 'Home & Business' version. The other major tax software company H&R Block At Home (formerly known as TaxCut) will file Schedule C with their 'Deluxe' version, which is $35-$45 list price, often on sale for $25 or less. Re-update: TurboTax ended up changing their mind about this later in 2015 due to the amount of complaints, but I'm staying with HRBlock now, as it's more affordable than the equivalent TurboTax version.]
11. Any time anyone asks a tax-related question online, there will always be recommendations to contact a tax professional. This is an easy thing to say, but there are a lot of tax professionals out there who are not very well-informed/experienced with self-employment taxes. If you go this route, I would recommend you still do your own research, so you have some idea if what they tell you sounds right/reasonable/plausible or not. People with self-employment-related questions have even reported getting different answers from different reps on the IRS help line. Personally, my comments here come from having done my own self-employment filings for about a decade (without an audit so far, knock on wood), reading every relevant IRS webpage I could find, reading every relevant help page in Turbotax, reading every relevant tax professional blog/article I could find, and reading numerous discussions on non-tax-professional forums/blogs (after doing the other reading, you'll hopefully be able to spot the badly-mistaken comments, and see what other people's experiences have been).

Hey there I know this is years later but i have just completed my first year on Turk. About how much in taxes did you have to pay? I made about $9000 this past year

 

[PandaThief]

Hey there I know this is years later but i have just completed my first year on Turk. About how much in taxes did you have to pay? I made about $9000 this past year

15%x9000= $1350 is what you should be paying