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Taxes For Turkers - Reporting Self-Employment Income

Discussion in 'MTurk Help & Resources' started by clickhappier, Jan 20, 2016.

  1. clickhappier

    clickhappier
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    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.

    1. Self-Employment Tax Tips Key Points - start here
    2. Explanation of Deductions/Exemptions/Credits, Effective Tax Rates, and Tax Brackets
    3. Whither 1099s? - you won't get any 1099-MISCs from MTurk (or individual requesters), but a few people will get a 1099-K from Amazon Payments
    4. what is self-employment tax?; what about quarterly payments?
    5. Medicaid eligibility and Federal Poverty Level
    6. what about SSI/SSDI?; people who had a job without having to file taxes before
    7. what if you're over the Medicaid limit?
    8. MTurk is Self-Employment Income, not 'Other Income'
    9. what if you accidentally earn more than you wanted to, to remain eligible for some benefit? - deduct a legitimate business expense
    10. clarifications regarding 1099 situation, having more than one source of self-employment income, and how MTurk / Amazon Payments is different from a traditional employer
    11. when do you need to report your income (dollar amount and timing)?; why tax stuff can't be responsibly/accurately simplified much more than I already have here
    12. regarding SNAP (food stamps program)
    13. don't fabricate illegitimate business expense deductions
    14. info regarding Health Insurance - Healthcare.gov - Affordable Care Act
    15. when and where will MTurk tell you your earnings for the year?
    16. regarding EITC/EIC (Earned Income Tax Credit)
    17. what if you use a professional tax preparer?
    18. more info on what your options are for determining your total annual MTurk earnings
    19. do you need the most expensive tax software version? (no)
    20. more on tax software versions
    21. 2014 tax software
    22. how soon can you file, what paperwork should you be waiting for?
    23. why/how the 1099-K stuff is so different from the more-familiar 1099-MISCs
    24. clarification on the $400 threshold
    25. choosing a "Principal Business or Professional Activity" code
    26. 'that's not how tax brackets work'
    27. how to fill out your basic business info for a Schedule C
    28. regarding Amazon being later than usual in posting 2014's totals in early 2015
    29. how refundable tax credits work
    30. variations in the many ways of adding up the thousands of tiny pieces of MTurk earnings
    31. tax effect of adding self-employment earnings onto a regular W2 'day job'
    32. 'tax write-offs' don't make things free
    33. for people with a W2 job, how to adjust your W4 to get more withheld from your paycheck to cover self-employment taxes
    34. you don't need Amazon's EIN (employer identification number)
    35. no need for paranoia about posting weekly reports
    36. if you're surprised at how much you owe
    37. if you're surprised at how little you owe
    38. where to enter self-employment income without a 1099-MISC in H&R Block software
    39. ways to send in estimated quarterly payments
    40. if you sell stuff on Ebay
    41. addressing confusion about the tax status of 'bonuses'
    42. difference between if you have a W2 day job or not
    43. tax return processing time
    44. if you're still being claimed as a dependent
    45. if you pay someone to help you with your self-employment work
    46. keeping track of earnings sent to your gift card balance (those are still taxable income)
    47. 2015 tax software
    48. if you're married filing jointly
    49. 'feeling overwhelmed' getting-started summary
    50. regarding Amazon being earlier than usual in posting 2015's totals in early 2016
    51. more about deductions
    52. dealing with small differences in the ways of deciding which year the tons of tiny bits of turking income belong in
    53. if you can't afford your tax bill
    54. turking isn't a 'hobby' in the eyes of the IRS
    55. despite all the ads calling tax season 'refund season', not everybody gets a refund
     
    #1 clickhappier, Jan 20, 2016
    Last edited: Feb 4, 2016
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  2. clickhappier

    clickhappier
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    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.


    [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).]

    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).
     
    #2 clickhappier, Jan 20, 2016
    Last edited: Jan 21, 2016
  3. clickhappier

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    The second of my extensive comments about taxes on Reddit, from later in June 2014 , focused on deductions/exemptions/credits and effective tax rates:


    The traditional 'rule of thumb' for taxes as a self-employed person is to set aside 1/3 of your income for the various taxes. You can always set aside more than you need if you want to be extra-safe. But unless you're really raking it in as a successful self-employed plumber or whatnot, for most people who'd even be considering mturk, it'll be a whole lot less than that.

    If filing MTurk income as Schedule C self-employment earnings, there's federal 'self-employment tax' (SE tax) = employee's 7.65% SS+medicare contribution + employer's 7.65% contribution = 15.3%. The amount you have to pay for the 'employer' half gets deducted from your self-employment income (don't have to pay income tax on it).

    Any qualifying self-employment business expenses can be fully deducted (the average mturk worker won't have much of these, but this can include things like mileage, shipping costs, etc), and you won't pay SE tax or income tax on that money.

    If you have a regular W2 job (or had at any point during the tax year), any excess withholdings from that which would've otherwise been refunded to you will be used to reduce the SE tax or income tax you owe on your self-employment income.

    There's state income tax, which varies widely. $0 for some people in the right states.

    Then there's federal income tax.
    • First, you don't pay anything on the first several thousand dollars of taxable income ($6100 last year for single/married-filing-separately filers, $8950 for 'head of household' aka single with dependents, $12,200 for married-filing-jointly), called the 'standard deduction'. If you have a ton of other 'itemized' deductions of certain types that get filed on Schedule A - mortgage interest, donations, etc - adding up to more than the 'standard deduction', you may use those instead.
    • Then you get the per-person exemptions for yourself and any dependents ($3900 each last year). This is more money you don't pay any federal income tax on.
    • Not familiar with this myself, but apparently "There is also an additional standard deduction for blind taxpayers or taxpayers over 65. It is an additional $1,450 if you are filing singly and $1,150 if filing jointly."
    • You can also fully deduct (don't pay any federal income tax on) any money spent on privately-purchased health insurance as a self-employed person.
    • You can also fully deduct (don't pay any federal income tax on) any money spent on the interest portion of student loan repayment. Or if you're still in school, for any money spent out-of-pocket on tuition and fees.
    • If you're over a certain age and/or have one or more dependent kids, have earned some amount of money from working in the tax year, and are not still being claimed as someone else's dependent, you also get a fully refundable tax credit (meaning you still get this money back, or at least get to use it to reduce the SE tax you owe, even if after all those other deductions you're left with no income actually subject to federal income tax) called the Earned Income Tax Credit (EITC), of varying amounts - might be $100, might be thousands.
    If your income is low enough and you qualify for enough deductions/credits, you may well not owe any federal income tax at all (likely not any state income tax either), and your SE tax left to pay may be the equivalent of 5% or less, or you may even get a net credit (negative tax rate). (PS: If you're in the 'no federal income tax' category, you should probably take a look at http://liheap.org/find-state-map/ , you may qualify to get some savings on your energy bills.)

    If, after all that, you actually have income left undeducted/uncredited that you have to pay federal income tax on (be happy that you're earning enough for that to happen! ;-) ), only then do we get into the often-misunderstood tax brackets. The income remaining after the deductions/credits, up to ~$9k single/married-separate or ~$18k married-jointly or ~$13k head-of-household, will be taxed at 10% federal income tax rate. If you still have more left over above the limit of that tax bracket, that remaining income gets taxed at 15% in the next bracket, etc.
     
    #3 clickhappier, Jan 20, 2016
    Last edited: Jan 21, 2016
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    Whither 1099s?

    Originally written in July 2014:

    REQUESTERS DON'T SEND 1099s TO ANYONE AND HAVEN'T FOR SEVERAL YEARS.

    For the record, regarding the apparent previous practice (from what I'd heard) of Amazon providing workers' tax information to any individual requesters a worker earns over $600 from in one year for the requesters to issue 1099-MISCs to us themselves (I had originally thought the potential Amazon Payments 1099-Ks were to be in addition to, rather than instead of, the potential requester 1099-MISCs):

    In the MTG July 9, 2014 daily thread, user Jak temporarily posting as WhydidyoubanmeZingy said:

    FNAkun wrote: "Damn son. I've made $1000+ off of these OCMP22's so far. Guess I'll be getting a 1099 from them this year o: "

    WhydidyoubanmeZingy (Jak) wrote: "Requesters don't send out 1099's anymore. Amazon took over that last year, but even they don't bother sending them out." ​

    Looking for corroboration/clarification, I found this in the MTurkWiki forum Jan 31, 2014 daily thread:

    j0sh wrote: "So IDK if this has been discussed, but I just got this in my email from CrowdSource."

    " Due to recent IRS regulation changes under section 6050W, CrowdSource is no longer required to issue Forms 1099-MISC for Mechanical Turk transactions.

    Amazon Payments, as the third party payment network provider for Mechanical Turk transactions, is responsible for reporting transactions that meet the IRS thresholds via Form 1099-K. Due to the higher thresholds required for issuing Form 1099-K, you may not receive a 1099-K for the payments you received for Mechanical Turk transactions. There is no reporting requirement for payments under $20,000 and less than 200 transactions.

    Please note this information does not constitute tax, legal, or other professional advice. To find out how this new legislation will affect you, or if you have other questions, please contact your tax, legal, or other professional adviser. "​

    To clarify, from the IRS's 1099-K info:

    " 1099-K Reporting Requirements for Payment Settlement Entities

    Beginning in January, 2012, payment settlement entities (PSEs) are required by the Housing Assistance Tax Act of 2008 to report on Form 1099-K the following transactions:
    • All payments made in settlement of payment card transactions (e.g., credit card);
    • Payments in settlement of third party network transactions IF:
      • -Gross payments to a participating payee exceed $20,000; AND
      • -There are more than 200 transactions with the participating payee. "

    So unless you earn more than $20,000 in a year from MTurk and transfer your funds more than 3-4 times a week all year, it sounds like you wouldn't see any tax documents related to MTurk. This would presumably affect an even smaller percentage of workers than the $600 rule did previously, so it could easily give the appearance of Amazon not bothering to send out any.

    Update Dec 2014: I have now heard from one worker who surpassed both the $20k and 200-transaction thresholds in 2013, and they did receive a 1099-K in Jan 2014 as promised.

    One important result of this apparent change is that the scenario I'd heard of occasionally happening previously, where a requester blocks a worker who's about to hit $600 from them that year to avoid having to mess with sending out 1099-MISCs, shouldn't happen anymore, if the requesters all understand this.

    PS: Do please remember that whether you receive 1099-MISCs, 1099-Ks, or no tax documents at all, you're still obligated to report all your self-employment income to the IRS.


    Update Dec 2014: I finally unearthed some up-to-date documentation about this 1099-K stuff on the redesigned-earlier-in-2014 Amazon Payments site. Amazon Payments - Help - User Agreements & Policies - 14th section down the list: "IRS Reporting Regulations on Third-Party Payment Transactions" (archive)


    Update Feb 2015: I've heard from a couple people who received 1099-Ks for the 2014 year that reported 5000+ transactions. So it looks like it's not the withdrawals out of Amazon Payments that count towards that 200 number, it's the number of transfers from MTurk into Amazon Payments. This number is probably so high only for people who were working on MTurk prior to early April 2014, when MTurk added the extra step of having to manually request transfers out of MTurk and limited that to no more than once per day; but prior to that, your earnings were apparently automatically transferred from MTurk into AP every time HITs got approved. I'm guessing that them making that change to the transfer process was at least partly motivated by trying to reduce the amount of 1099-Ks that would be necessary. For the 2015 year and beyond, that shouldn't be an issue again.


    Update Feb 2016: Kadauchi told me he received a 1099-K for 2015 even though his number of transfers was definitely under 200. So Amazon might not have that programmed properly, still. Definitely won't be getting one if you earn <$20k, but the number of transactions might not be as relevant as it's supposed to be.
     
    #4 clickhappier, Jan 20, 2016
    Last edited: Feb 4, 2016
  5. clickhappier

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    From Aug 2014:

    'duck' asked on the MTG tax thread:

    " Wow, I'm glad someone linked this thread over in the daily HIT section. Lots of great info. I'm still left with a few questions though that maybe someone could answer?

    1) Do you pay federal income tax even if you're below the threshold of I believe $10,000 or do you just pay the self employment 15~% tax for Social Security and Medicare? I'm not sure if self employment wages are exempt from that wage limit but I suspect not. " ​

    Yes, as described in further detail in my 2nd post Explanation of Deductions/Exemptions/Credits, Effective Tax Rates, and Tax Brackets, a single person generally won't owe federal income tax on income less than ~$10,000 per year ($6900 'standard deduction' plus $3100 'personal exemption').

    Self-employment tax is 'double FICA tax' - the employer and employee shares of your contributions to Social Security and Medicare. All taxable income, starting from the first dollar (and on up to some silly ceiling/cap currently), is subject to FICA tax at the same rates, whether regular 'single' FICA or self-employment 'double' FICA.

    " 2) For quarterly filings, do those being the year after you first start so you can estimate it? Or do I send them quarterly payments as I am earning it now?

    Thanks! "​

    Points 7, 8, and 9 (they're now numbered) in my 1st post Self-Employment Tax Tips Key Points - start here are about quarterly filing considerations. You will probably be eligible for the safe-harbor of not needing to pay quarterly payments this year if you owed less than $1000 at the time of your 2013 annual tax filing that was due in April 2014. If you want or need to proceed with making quarterly payments, you estimate them based on your expected earnings. More information is available at:
    - http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center#QuarterlyPayments (brief overview, including a link to the free online service you can use to make those payments)
    - http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Estimated-Taxes (more details, including corroboration of the $1000 rule and other factors)
    - https://turbotax.intuit.com/tax-tools/tax-tips/Small-Business-Taxes/Estimated-Taxes--How-to-Determine-What-to-Pay-and-When/INF12007.html (more details, restates the above links' info in ways that may be easier to understand)


    And duck's response:

    " Thank you very much for all the information and work you've put into this thread. It does answer a lot of questions for me... like I wasn't aware I could take the standard deduction and the personal exemption too to reduce my tax bill. The 15% for FICA/social security doesn't seem like such a big deal at all.

    And it's also nice to know I won't have to worry about quarterly payments until next year... if I'm still doing this and have no full time gig yet. "​
     
    #5 clickhappier, Jan 20, 2016
    Last edited: Jan 21, 2016
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    From Aug 2014:

    Antoine Roquentin wrote:

    " This all sounds like an actual Hell to deal with; it really puts a damper on my enthusiasm to continue doing this. Luckily my grandmother, a CPA, hasn't fully retired yet, so I at least don't have to pay someone to get advice about this headache.

    What had crossed my mind, though, is that getting more seriously into turking could push me into an income range where I can no longer get free health benefits, so then I'd go back to not having healthcare. I don't know about anything. "​

    Eetha wrote:

    " I am glad I am not the only one using a CPA grandmother for her taxes (well, husband's grandmother, but my goodness I'm grateful we have her around.) I'm worried kind of about healthcare too, I'm in the same boat, PLUS husband just got made full time at his job. "​

    lol at CPA grandmothers/grandmother-in-laws. :) Just make sure they're familiar with self-employment tax filings; CPAs aren't always as familiar/experienced with some areas of taxes/accounting as with other areas.

    Without more specifics of your situations, hopefully this will be relevant:
    If you are in a state that has accepted the full expansion of Medicaid eligibility, you will remain eligible for free Medicaid health insurance up to a household income equal to 133% (1.33x) of the Federal Poverty Level.
    For 2014, the FPL is $11,670 for a 1-person household, $15,730 for 2-person, etc (higher in Alaska and Hawaii).
    133% (1.33x) of those are $15,521 for 1-person, $20,920 for 2-person, etc.

    You won't earn that kind of money on MTurk by accident; you can always stop if/when you get close to those numbers for the year (or whatever portion of those numbers isn't already 'used' by other household income sources).
     
    #6 clickhappier, Jan 20, 2016
    Last edited: Jan 21, 2016
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    From Aug 2014:

    Here's a couple more tax-related comments I made on Reddit today: http://www.reddit.com/r/mturk/comments/2ej4pz/im_over_the_age_of_18_but/


    If you sign up for MTurk without having filed taxes before, some people do have problems getting verified with Amazon Payments in that situation. This is sometimes easily resolved with a fax for some people; other times for unlucky people, it inexplicably becomes a nightmare. However, if you've had W2 jobs before and just not actually filed your side of things, you might be in the IRS database from the employer sending in the W2 data (on a form W3); I don't know exactly what gets included in the way Amazon Payments checks this stuff.

    If you've had jobs but never filed taxes before (presumably due to earning low enough amounts at a W2 job that you weren't required to file; note that unlike W2 jobs, any self-employment earnings such as MTurk should be filed regardless of how little you earned), it would likely be in your best interest to look into retroactively filing for those years anyway, as you likely have unclaimed refunds owed to you.

    SSI and SSDI are very tricky. Any earned income, including that from MTurk, can potentially affect your status. Please research thoroughly what the limits are in your particular situation, and contact an official representative if you're not sure. Don't try to hide income.

    https://www.disability.gov/what-is-the-difference-between-social-security-disability-insurance-and-supplemental-security-income/
    http://www.socialsecurity.gov/ssi/text-income-ussi.htm
    http://www.mturkgrind.com/threads/5300-Taxes-on-MTurk-income


    clarification re: how someone could have had a job before but not filed taxes:

    If you earn less than the standard deduction + personal exemption (currently $10,000 total for most single people) in a year from W2 work, you're not required to file taxes. But if you don't bother to file, you don't get the refund you were likely owed from over-withholding, the EITC, etc. (PS: It's not too late... you can still catch up on filing and claim a refund "within 3 years of the return due date". http://taxes.about.com/od/taxtrouble/a/back_taxes.htm )

    But if you have any self-employment earnings such as from MTurk, you will owe at least a small amount of taxes on that, and "You must file Form 1040 if you owe any self-employment tax."

    http://www.irs.gov/publications/p501/ar02.html#en_US_2013_publink1000220687
     
    #7 clickhappier, Jan 20, 2016
    Last edited: Jan 21, 2016
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    From Aug 2014:

    Eetha wrote:
    " And yeesh, sounds like husband and I will be just over the 2-person limit, which is too bad because my state's Medicaid is really good. I better get all of my appointments out of the way before the end of the year, then P: "​

    If you're just over the expanded Medicaid limits, you should still be eligible for very-reduced-price non-Medicaid coverage through healthcare.gov. :) https://www.healthcare.gov/how-can-i-save-money-on-marketplace-coverage/
     
    #8 clickhappier, Jan 20, 2016
    Last edited: Jan 21, 2016
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    A reiteration I posted in the 8/27/14 MTG daily thread in response to some posts the night before:

    The money you earn on MTurk is Self-Employment Income, not 'Other Income' (mentioned as 'additional income' yesterday), unless you only earn a small amount and do it for just a short time and then quit (if your activities on MTurk are regular/frequent, intended to be a source of income even if not your primary source, they are self-employment). You will owe self-employment tax (the employer and employee shares of your contributions to Social Security and Medicare) on those earnings, even if your total income for the year is less than the amount at which you would've otherwise had to file taxes and pay federal income tax; and "You must file Form 1040 if you owe any self-employment tax." Yes, some misinformed or dishonest people may get away with filing this income incorrectly or not at all. But people who happen to get selected for audits do get penalized for failing to accurately report self-employment income. And if you take the honest legal route, the amount you'd owe will likely be less than you might assume (and peace of mind is priceless :) ).
     
    #9 clickhappier, Jan 20, 2016
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    clickhappier
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    From Aug 2014:

    Tribune wrote:
    " "Slowing down," as you suggested, can work. Just don't cut it too close, or get any unexpectedly large bonuses. ;) "​

    With possibilities like some of those big survey 'lottery' bonuses that take weeks or months to appear, that could definitely be a concern in such a plan. ;)

    If something like that does occur to someone who's trying to avoid earning too much in a certain time period, another thought is that one of the benefits of self-employment filing is the ability to deduct expenses that are clearly business (self-employment-work)-related from your taxable income total. So one could use such an unexpected windfall or other accidental overage to, for example, buy a transcription footpedal and software, or donate to your favorite MTurk forum as Tribune mentioned earlier, and get back to being within your intended limit.
     
    #10 clickhappier, Jan 20, 2016
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    From Sep 2014:

    Here's some more recent tax-related comments I posted on Reddit - some reiteration of what's already in this thread, some additional information:


    http://www.reddit.com/r/mturk/comments/2gomyw/how_does_tax_info_gets_verified/

    [unappreciated attempt to respond to a vague question about the verification process(es) and clarify some other inaccurate responses:]

    They're very secretive about the verification processes, so I doubt it will be possible to get a good answer on this. There seems to be one process at MTurk itself, and a much more stringent process at Amazon Payments.

    Yes, it obviously involves the IRS due to the problems people who haven't filed taxes before run into, but we have no further specifics. Most employers have a much less stringent process than AP for identity checking - verifying SSN though E-Verify, if at all (the minimum most employers are only required to do is look at the ID you present to them and send in whatever SSN you tell them is yours to file taxes under, not to actually verify anything), and not directly involving the IRS.


    [re: does MTurk "send you the tax info like an employer does?"]

    Nope. MTurk isn't our employer, we are self-employed, and they apparently don't send out 1099s anymore unless you pass a very high transaction threshold with Amazon Payments. You are still legally obligated to file taxes on your earnings. I put together a bunch of information about this here [link to this thread].


    [re: can/should/do "you combine self-employed positions or file two separate tax returns for them? IE: If I have my own business, do I file mturk separately from that?"]

    If you're just doing all your self-employment work under your own name (without an EIN, DBA, LLC, etc), you typically can file it all together. But if you're doing two very different kinds of work ("unrelated activities"), it may be better to keep separate records and file them on two separate Schedule Cs. It typically all works out to the same final totals on your one Schedule SE and your 1040 in the end, but separating them would make the records clearer both for you and for any hypothetical auditor.


    http://www.reddit.com/r/mturk/comments/2h0mh2/blocked_a_worker_a_little_surprised

    [re: another person still expecting 1099-MISCs... if anyone has actually received one from an MTurk requester since 2012, do let me know]

    Good comment, but one correction:
    "make $600 in one year from ONE requester will be issued a 1099[-MISC]"​

    This part seems to have changed in recent years - now the only 1099s appear to be 1099-Ks sent to the very few turkers who surpass much higher thresholds with their total Amazon Payments transactions.


    [re: reply to that alleging that in that case, Amazon must be "breaking IRS regulations" and the lack of reporting means money laundering]

    I collected some information about the change here. Amazon didn't do a very good job of updating their documentation pages about this, but it seems the introduction of the new 1099-K reporting requirements for payment processors superseded the 1099-MISC requirements, since this work all goes through a payment processor that would potentially be double-reporting otherwise.

    Amazon seems to be extremely concerned about fulfilling regulations - that's partly why they stopped accepting international workers a couple years ago, are in the process of tightening down on international requesters, and are so annoyingly strict in the AP account verification process. So I wouldn't worry about / assert such things, they're a huge company that should know how to do what they have to do. :shrug:

    We are all still supposed to be paying taxes on all of our MTurk earnings as self-employment income, regardless of what paperwork is or isn't sent to us about it.
     
    #11 clickhappier, Jan 20, 2016
    Last edited: Jan 21, 2016
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    From Sep 2014:

    I received a PM asking when they would need to report their income, and saying they "don't understand the lingo". Here is my response, so more people can benefit from it:


    If you're asking 'when' as in 'how much money', the IRS says:
    "You have to file an income tax return if your net earnings from self-employment were $400 or more. If your net earnings from self-employment were less than $400, you still have to file an income tax return if you meet any other filing requirement listed in the Form 1040 instructions (PDF)."​
    So if you earn at least $400 total from MTurk and any other self-employment work in one calendar year, which it sounds like you're on track to do unless you quit, you will need to file taxes.

    If you're asking 'when' as in 'what time of year', you can *probably* wait until spring 2015 (due every April ~15th) to file taxes for what you earned throughout 2014. Those with large amounts of self-employment income [exactly how large this 'large amount' is will vary based on many factors, see below] need to also send in quarterly estimates due every April ~15th (same time as you pay/file your actual taxes for the previous year), June ~15th, Sep ~15th, and Jan ~15th.

    It's just something that anyone earning taxable income has to buckle down and learn enough about to be able to understand their obligations, just like someone who wants to drive has to learn traffic laws. If you earn enough to be able to justify paying for it, you have the option of paying an accountant to help with some of it, but the responsibility is ultimately yours. It is inherently complicated; there's no one simple answer to a lot of tax-related questions, because there's a lot of other questions whose answers can affect those, such as:
    • Are your parents still filing their taxes with you as a dependent?
    • Do you have any other sources of taxable income?
    • If so, is it an employee position where the company will be sending you a W2 tax form at the end of each calendar year, or is it other self-employment income, or some of both?
    • How much taxable income do you expect to earn from each of those other sources (if any) in this calendar year?
    • Have you every filed taxes before?
    • If so, how much did you owe at tax time last year, or did you get a refund?
    • Are you eligible for any tax credits that would reduce what you owe this year? (Lots of variables on this.)
    • Do you have any kids?
    • Are you married?
    • If so, all of the above questions apply to the spouse too, if you plan to file jointly.
    Also, if you are receiving any government benefits from programs that care about how much your income is, they each have their own reporting requirements.

    (Note: This list of questions isn't an invitation to post or pm the answers to them and expect specific personalized answers about your taxes. I'm usually willing to answer more generalizable questions in public as best I can, but I'm not your accountant.)
     
    #12 clickhappier, Jan 20, 2016
    Last edited: Jan 21, 2016
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    From Sep 2014:

    Sora wrote:

    " I may be drawing SNAP benefits in the near future, and I know I'd have to report to them if I got a job/other finances coming in. About how much would I need to make in a month to justify consulting them?

    Most of what I'm making through mTurk is going straight to bills and gas, so it isn't disposable. I don't believe it'd be considered "extra" income by any means, considering this is my (currently) primary source of income. "​

    Income-based government assistance programs generally primarily care about the total amount of taxable income you're receiving in a specified timeframe, regardless of what it's being spent on. Depending on the state you're located in, number of adults and kids in your household, other government programs you may qualify for, etc, the threshold at which they start reducing your aid for additional taxable income earned may vary. All taxable income should be reported to any government programs you are a recipient of, or you could be in big trouble if they ever discover later that you weren't reporting it. The particulars of how they want fluctuating self-employment income to be reported will vary with different programs.

    For SNAP in particular, these are generally the maximum monthly income levels to qualify for the minimum amount of SNAP benefits (less income = more benefits): http://www.fns.usda.gov/snap/income-rules-income-limits . In addition to taxable income (gross income), they also consider your net income (which is the gross income minus certain particular deductions just for their calculations): http://www.fns.usda.gov/snap/eligibility . SNAP is also noteworthy for not allowing many recipients to have more than $2,000 in assets (e.g. in a bank account); not including an owned home, one car per adult worth no more than $4,650, and retirement accounts.


    Eetha's SNAP experience, Sep 2014:

    " We reported my mTurk income to our SNAP case worker by giving them a spreadsheet showing my earnings for that month, noting that it was untaxed helped as well. I know that every time we update with them regularly, they tell us pretty much we don't HAVE to unless we pass a certain monthly income limit between the two of us (Like, "Oh, we don't care if you're making more money if you're still under $1600 or whatever.)

    'Course they still called a week later 'cause they had no idea what to make of my pretty color coded spreadsheet that said "Self-Employment Income 2014." I think our worker was also generous and based our benefits off of what we'd make if I was making the lowest amount I had on there for a week consistently, rather than taking into account that sometimes I made nearly twice that. So husband and I now get a total of $16 in food stamps a month. Ha. But that's good because at least that means we still qualify for our health insurance for the time being :) As much as I know that we shouldn't HOPE to be on welfare of any sort... the state medicaid is really good P: "​


    Additions from Nov 2015:

    Sik06 wrote:

    " I am trying to fill out a form for SNAP. They want the address for my earnings. I have looked everywhere and can't find an address for them. Does anyone get a 1099 with an address or know what it is? TIA "​

    My initial response:

    Well, you're self-employed, meaning your employer is technically yourself so it should be your own address. (Amazon isn't your employer, they're your conduit for getting work and payment from hundreds of 'clients'.) But if you want to put Amazon anyway (I know gov programs like that probably find this kind of work confusing), their headquarters is:
    410 Terry Ave N
    Seattle, WA 98109

    Oh, and Jaded has experience with this iirc, how did you handle that on your SNAP paperwork? ​

    Jaded's SNAP experience, Nov 2015:

    " They didn't make me specify, it was partially done over the phone, but she just put self employed and didn't ask for anything else. "

    " As an update to this, I had my renewal interview today. They just basically asked "What are you doing for money." I said "Freelancing through Amazon." They said "OK, send us 3 months of statements showing their payments." and that was all. "​

    Desertdarlene's SNAP experience, Nov 2015:

    " Generally, when it comes to filling out any kind of government benefit forms, you put your address as the employer. You may also have to put "Self Employed" as the name of the company, but that varies from benefit to benefit. "​

    hyzmarca's SNAP experience, Nov 2015:

    " Put down self-employment. Really, you should.

    Self Employment income gets an automatic 40% deduction for business expenses (or total documented expenses, whichever is higher) when calculating Net Income for SNAP on top of the 20% Earned Income Deduction, meaning they only count 48% of your income before they start deducting living expenses. "​

    Reddit user unimagination's experience, Feb 2016:

    " I just enter that I am self-employed and enter the rough monthly amount I earn into the food stamp application. Then I usually just fax them a signed and dated screenshot of the 45-day earnings from the mTurk site or monthly report from Amazon Payments. "​

    Reddit user yakuza_'s experience reiterating the importance of reporting this income, Feb 2016:

    " It's taxable income, he has to report it or he's going to have to backpay his SNAP benefits for claiming benefits he shouldn't have. This is done either through reducing the monthly benefit or he'll have to pay cash if he's over the limit/off SNAP already. I know this from personal experience. Was a rough ~14 months because of a misclaim of the benefits + losing a dependancy, which in itself impacted the benefits quite a bit. The backpay was difficult. He's better off doing it the legitimate way and having some food assistance still than avoiding it til later and getting very little assistance, or even losing income from it. ..."​
     
    #13 clickhappier, Jan 20, 2016
    Last edited: Feb 3, 2016
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    From Nov 2014:

    Some inaccurate tax-related information was being discussed in chat this afternoon. Read this thread, people, seriously. Don't go overboard on claiming deductions for things which are not 100% dedicated to work. That's how people get audited. The vast majority of turkers do *not* have a separate computer and separate space in their home that is exclusively dedicated to work, so you do not have a deductible home office, which means you cannot deduct your electricity bills, and can't deduct your internet bills unless you keep records of what percent of your use is business (self-employment) vs personal and day-job-related (like you have to do with vehicle mileage). And no, your expensive gaming computer parts are not legitimate business deductions either. :tsk:
     
    #14 clickhappier, Jan 20, 2016
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    info regarding Health Insurance - Healthcare.gov - Affordable Care Act

    Originally written in Dec 2014:

    Here are some summaries for the most common scenarios.

    (Note that if you live in a state that runs its own state marketplace/exchange instead of using healthcare.gov directly, you can still start on healthcare.gov and it will direct you to your state site accordingly; I just say healthcare.gov everywhere for conciseness.)

    If you...
    + live in a state that did expand Medicaid eligibility
    + have a household income less than 1.38x the current 'federal poverty level' (FPL)
    + and don't have health insurance provided through a traditional job of you or a family member
    = then if you haven't already signed up for the free Medicaid health insurance you're likely eligible for, go to https://www.healthcare.gov/ and get signed up for it!

    If you...
    + live in a state that didn't expand Medicaid eligibility
    + have a household income less than 1x the current FPL
    + don't have health insurance provided through a traditional job of you or a family member
    + and will be going without because you don't have enough room in your budget for full-price health insurance
    = go to https://www.healthcare.gov/ and go through the initial registration/verification process anyway; before/without actually signing up for an insurance plan, you should receive a personal 'Eligibility Notice' PDF download that contains an 'Exemption Certification Number' (ECN) for you to include on your 2014 tax filing (the one due in Apr 2015), to prove you don't have to pay the fee for not having had health insurance in calendar year 2014 (it's also possible to apply for these exemption numbers separately by mail, but it's a lot easier to just do it through healthcare.gov, don't know why that webpage doesn't mention that method!)

    If you...
    + have a household income at least 1x the current FPL, but less than 4x the FPL
    + don't have health insurance provided through a traditional job of you or a family member
    + and haven't already bought individual health insurance through healthcare.gov last year
    = go to https://www.healthcare.gov/ and get your subsidized (discounted) health insurance!
    * if your income is between 1x-2.5x the FPL, you may qualify for additional savings if you select a 'silver' plan rather than one from the other tiers

    If you...
    + already have insurance you bought through healthcare.gov last year
    = go to https://www.healthcare.gov/ and make sure it's still the best plan at the best price for you this year - prices may go up or down on plans that were available to you last year, some plans may no longer be available, and some new plans may be available; and depending on how the prices/availability of other plans offered in your local area may have changed, your subsidy amount may have changed even if your household income hasn't
    * also be aware that you must file a 2014 tax return (due in Apr 2015), even if you wouldn't otherwise have been required to (most active turkers already should be filing, as previously covered in this thread) (see the last q&a here)


    When healthcare.gov asks about your income, you can select 'self-employed' as the source of all or part of your income, type a brief description of the kind of work you do, enter the amount you earned last month (the instructions say they understand this will vary unpredictably for self-employment), and select 'monthly'. And you should also be offered an option to allow healthcare.gov to automatically retrieve the actual income amounts from your future tax filings for the next 5 years, so you shouldn't have to worry about manually updating that information unless something changes significantly.


    The deadline [for 2015] is December 15, 2014 to sign up for health insurance that you can start using January 1, 2015. For insurance starting as late as March 1, 2015, you can still sign up as late as Feb 15, 2015. After that, you generally have to wait till next fall.
     
    #15 clickhappier, Jan 20, 2016
    Last edited: Jan 20, 2016
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    From Dec 2014:

    PhantomCatt wrote:

    " This might be a silly question but... How do you find out exactly how much you have made from MTURK earnings over the past year?

    I've been turking on and off the last two years. On last years taxes I honestly just estimated my earnings at about $123. This year I would like to be exact. The past few months turking has become somewhat of a necessity to make ends meets. Needless to say I know I've made at least $2000 over the past few months and considering that turking has been my ONLY source of income aside from student loans this past year, I really need to figure out how much I made so I can report it accurately on my taxes. I just recently started using hit database so I do not have records from about January thru September. Does this make sense? Help please :) "​

    MTurk will tell you, in the 'Total Earnings' area. People who've been turking in more than one calendar year should have a 'Show earnings details' link next to your 'Total Earnings' to access a year-by-year breakdown. It will probably take until the end of January or beginning of February for the previous year's earnings (for 2014 in this case) to be added to the 'Show earnings details' breakdown.
    (2015 Update: I think they're waiting all the way till the end of January after all, maybe to be sure everything from December has passed its 30-day maximum approval time; the few comments I had found from previous years that said mid-January were apparently inaccurate recollections.
    2016 Update: They did it in early January this year, probably only including HITs approved within 2015. Who knows anymore. :rolleyes: )

    Like this (not my dashboard):
    [​IMG]
     
    #16 clickhappier, Jan 20, 2016
    Last edited: Feb 3, 2016
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    clickhappier
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    From Dec 2014:

    sharptooth wrote:
    "How much should the EIC (earned income tax credit) cover? "​

    The EITC/EIC varies widely, as I mentioned here: Explanation of Deductions/Exemptions/Credits, Effective Tax Rates, and Tax Brackets. It depends on your marital status, number of children in your household, and what your total income ends up being. If you don't have a qualifying child, you must be at least age 25 - here are the full eligibility requirements. If you do qualify, here is an estimator I found, to get some idea of how much you can expect.
     
    #17 clickhappier, Jan 20, 2016
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    From Dec 2014:

    Zodiac wrote:

    " Generalized question.

    If I usually have a professional do my taxes, is it acceptable to disclose this to them as well and let them figure it out for me? "​

    Yes. You should try to learn enough to know if they're doing it wrong, though; I suggest reading my first post in this thread (the one linked in my sig).

    " I only ask because if that's the case, I'm not sure what I would show them and whether or not most tax professionals are familiar with Mturk. "​

    Print out your transfer history from your MTurk earnings tab or Amazon Payments. Tell them it's self-employment income. Make sure they understand to file it as actual self-employment income (Schedule C), not 'other income'.
     
    #18 clickhappier, Jan 20, 2016
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    From Dec 2014:

    fanaticalsanguine wrote:

    "... I need to know when the cut off is so I can attempt this tax bullshit as soon as possible and be done with it for the year. ..."​

    There's a few different ways you can choose to handle it:

    Whatever transfers you've initiated through the end of 2014 (today), add those up and that's your self-employment income amount. (This is basically what's called 'cash basis' accounting, counting the money by when you received it.)

    Or wait until MTurk posts a final 'total earnings for 2014' amount for you in January-February (you should probably wait until at least Jan 30 to really consider it final, if you have any pending HITs from late December that aren't approved yet when MTurk adds that section), as shown in this post: when and where will MTurk tell you your earnings for the year?, and use that as your self-employment income amount. (This is basically what's called 'accrual basis' accounting, counting the money by when you earned it.) This is a little simpler for those who don't mind waiting for that total to appear.

    Either is fine, just handle it the same way next year and so on, so it all gets reported eventually.

    People who receive tax documents from other sources of income generally get them in the mail around the last week of January to the first week of February.

    PS: If you've earned enough and transferred often enough that you'll be getting a 1099-K from Amazon Payments, you'll need to use the amount that will be reported on that.
     
    #19 clickhappier, Jan 20, 2016
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    clickhappier
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    From Jan 2015:

    FYI, nobody needs the home+business version of tax software unless (IIRC) you're having to file 1099s/W2s on employees *you're* paying (running a 'real' business with your own employees)... I've used the 'basic' version of TurboTax every time I've done my self-employment taxes for years. :thumb:

    UPDATE: TurboTax has betrayed me. It now only files Schedule C (self-employment) with the $100 version. Go with H&R Block Deluxe. See this post for details: more on tax software versions (Update later in 2015: They walked this back some due to the amount of complaints, but it will still cost more for the necessary TurboTax level than it does for the necessary H&R Block level.)
     
    #20 clickhappier, Jan 20, 2016
    Last edited: Feb 3, 2016
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