Taxes For Turkers - Reporting Self-Employment Income

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From Jan 2015:

Kerek wrote:

" The Premium version specifically mentions Schedule C and self-employment. Probably that's more about up-selling than lack of functionality in the Deluxe version, and mturk isn't the most complicated self-employment, but if anyone knew about any concrete differences that would be interesting to hear about. "​

The 'run on your own computer' (CD and download) tax programs from both TurboTax and H&R always all included capability to do self-employment taxes (and any personal tax forms), the higher versions just offer more 'guidance'. But as I went looking to confirm this was still the case, uh-oh, it isn't. :( :( I've been loyal to TurboTax for many years, but looks like that's gotta change now.

TurboTax info:
For [tax year] 2014, Desktop Deluxe will no longer be able to prepare Schedules C, D, E, or F. It will prepare a simple Schedule C-EZ for some people who qualify for that simpler form. Desktop Premier will no longer be able to prepare a full Schedule C or F.
Desktop Basic will no longer prepare Schedule A, C, D, E, F or a Form 1040--only 1040A or 1040EZ. In addition, desktop Basic no longer has Forms Mode.​

H&R info - they DO still support Schedule C in the deluxe version:
Home business owners might be getting a nasty surprise from TurboTax this year, and H&R Block is moving to offer free tax prep software to those customers. ... Many home business owners use a Schedule C form to report their business income and expenses. TurboTax Deluxe used to be enough for these business owners, but now the company no longer offers the Schedule C with TurboTax Deluxe. Instead, you have to upgrade to get a version with a Schedule C. For many home business owners, an upgrade all the way to Home and Business is probably necessary, since merely upgrading to Premier only offers limited Schedule C functionality in terms of deduction amounts. Many TurboTax customers are not happy about this requirement, since they have been used to accessing Schedule C with the Deluxe version.

For TurboTax customers who are upset about this change, H&R Block is offering a free version of their own software to disappointed TurboTax customers.

“By switching to H&R Block’s Deluxe product, an individual with a Schedule C will pay $44.95 MSRP, or get it free with this offer,” says Heather Watts, H&R Block’s Vice President of Digital Tax Products. “Meanwhile, that same individual would need to purchase TurboTax Home and Business, a $99.99 MSRP.”

What H&R Block proposes is to allow TurboTax customers to get a free copy of H&R Block’s own Deluxe tax prep software [with proof of TurboTax purchase]. ...​
 
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From Jan 2015:

Here are details of the H&R Block Deluxe (for tax year 2014, due in April 2015) options on sale on Amazon today [1/2/15] (thanks Tismo):

H&R Block Deluxe + State (if you live in a state that has state income tax) - MSRP $45:
$22 - Windows&Mac physical copy in frustration-free pkg: http://www.amazon.com/gp/product/B00P6U8BA0
$22 - Windows download: http://www.amazon.com/Block-Software-Deluxe-State-Download/dp/B00PG8FOSY
$22 - Mac download: http://www.amazon.com/Block-Software-Deluxe-State-Download/dp/B00PG8FSYE

H&R Block Deluxe (if you live in a state WITHOUT state income tax) - MSRP $35:
$17 - Windows&Mac physical copy in frustration-free pkg: http://www.amazon.com/Block-Financial-Tax-Software-Deluxe/dp/B00P6U8B96
$17 - Windows download: http://www.amazon.com/Block-Software-Deluxe-2014-Download/dp/B00PG8FFFQ
$17 - Mac download: http://www.amazon.com/Block-Software-Deluxe-2014-Download/dp/B00PG8FK9M

And an update regarding the 'how early can I file' questions, this says H&R Block's software will have its finalized versions for this year's tax forms ready for update downloads on or about January 8, 2015 for the Windows version, and January 15 for the Mac version.


Edit: And if you miss today's Amazon sales, or prefer to buy locally, the next best price currently looks to be OfficeDepot/OfficeMax, which have H&R Block Deluxe and H&R Block Deluxe + State for $10 off their MSRPs throughout tax season (through Apr 4, 2015).
 
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From Jan 2015:

clickhappier wrote:

"... And an update regarding the 'how early can I file' questions, this says H&R Block's software will have its finalized versions for this year's tax forms ready for update downloads on or about January 8, 2015 for the Windows version, and January 15 for the Mac version. ..."​

The H&R Block finalized forms were released for Windows-version software updates today (one day delayed) - except for a few that most people won't need, which will be released Jan 19. The Mac versions are still scheduled to be released Jan 15 (and Jan 26 for the same few obscure ones).

Some other stuff to be aware of, if applicable to you:
  • "The Internal Revenue Service will begin accepting tax returns electronically as of Jan. 20 and begin processing paper returns at that same time." (If you file by mail, you can mail it in as soon as you're ready, and they'll get to it when they get to it.)
  • "If you bought health insurance through the Marketplace for 2014, you want to keep an eye out for Form 1095-A, which should be sent out by the end of January. Consumers will receive their 1095-A from the Marketplace in the mail, and it will be posted to their online HealthCare.gov account ... Form 1095-A reports the total monthly health insurance premiums paid to the insurance company you selected through the Marketplace. It also details the advance payments of the premium tax credit that were paid directly to your insurance company."
  • and "If you had health coverage from another source, like a job, Medicare, Medicaid, or a plan you bought outside the Marketplace: You’ll report this simply by checking a box on your federal income tax form. You won’t have to fill out any additional tax forms. You won’t get a Form 1095-A." (see also this post that includes what to do if you didn't have any health insurance last year)
  • "Form SSA-1099 is sent in January to those receiving Social Security benefits. It shows total benefits received for the previous year."
  • "Also, 1099s [of various sub-types] can be sent [by Jan 31] for gambling winnings, self-employment or subcontractor income [from sources other than mturk except for a select few high earners], and interest and dividends on investments [and interest on bank accounts]."
  • "Buy a house? Make sure to keep the HUD-1, the closing statement you received when you bought and sold the house. If you refinanced a mortgage, you'd also have received the HUD-1 statement when you close on the refinance."

And the TurboTax features cutback driving people to switch to H&R Block is now making major headlines... you heard it here first, a week earlier! :ag: (more on tax software versions)
Log in or register now. to view Spoiler content!
 
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From Jan 2015:

JLO47 wrote:

"Anyone wondering about the moderately sketchy feel that the "threshold" for reporting moved from $600 to $20K? That's quite a jump if you ask me!"​

Yeah, it's kinda weird, but as I explained in the post about that, it's because a new different type of reporting requirement was introduced a couple years ago for payment processing services (actually because of a law passed in 2008 during the Bush presidency), which made the $600 type of reporting potentially duplicative for work paid through a service that was required to report at the $20k level. The intent of this type of reporting being introduced was to catch the larger business earnings for product sales, e.g. for serious Amazon.com/eBay sellers, and businesses that use regular credit-card-processing 'merchant account' services; that's a vastly larger pool of money that previously had no reporting outside of what the businesses themselves admitted to. So now, as that Forbes link says,

" Now, the instructions for the form 1099-MISC include this provision (instructions download as a pdf): "Payments made with a credit card or payment card and certain other types of payments, including third party network transactions, must be reported on Form 1099-K by the payment settlement entity under section 6050W and are not subject to reporting on Form 1099-MISC."
...
To be clear, just because you don’t receive a form 1099-K or form 1099-MISC doesn’t mean that you get a pass on reporting the income: it’s still taxable, form or no form. "​

It's good news because turkers no longer have to be concerned about some sketchy requesters being given our SSN and address by MTurk for the requester to make their 1099s, or requesters (with the possible exception of clueless ones who haven't caught on to this change) cutting people off from further work with them when a person gets close to $600 total from that requester because they don't want to have to bother with 1099s. Other sites that act as online work marketplaces tend to give 1099-MISCs only from the site as a whole, rather than from individual clients, but MTurk is different because of the Amazon Payments aspect.
 
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From Jan 2015:

Clarification/reminder on the '$400' threshold - it's the threshold for having to file Schedule SE and pay self-employment taxes (= double Social Security and Medicare taxes) on the amount of self-employment earnings. But even if you earned under $400 in self-employment earnings for the year, you are still required to file Schedule C to declare that self-employment income, and potentially pay *income* tax on it if you had enough other types of taxable income (like a W2 employee job).

http://www.irs.gov/uac/Reporting-Miscellaneous-Income

" Self-Employment Income

It is a common misconception that if a taxpayer does not receive a Form 1099-MISC or if the income is under $600 per payer, the income is not taxable. There is no minimum amount that a taxpayer may exclude from gross income.

All income earned through the taxpayer’s business, as an independent contractor or from informal side jobs is self-employment income, which is fully taxable and must be reported on Form 1040.

Use Form 1040, Schedule C, Profit or Loss from Business, or Form 1040, Schedule C-EZ, Net Profit from Business (Sole Proprietorship) to report income and expenses. Taxpayers will also need to prepare Form 1040 Schedule SE for self-employment taxes if the net profit exceeds $400 for a year. Do not report this income on Form 1040 Line 21 as Other Income.

Independent contractors must report all income as taxable, even if it is less than $600. Even if the client does not issue a Form 1099-MISC, the income, whatever the amount, is still reportable by the taxpayer.

Fees received for babysitting, housecleaning and lawn cutting are all examples of taxable income, even if each client paid less than $600 for the year. Someone who repairs computers in his or her spare time needs to report all monies earned as self-employment income even if no one person paid more than $600 for repairs. "​
 
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From Jan 2015:

Here's another topic for you to be thinking about if you're soon going to be filling out self-employment tax stuff for the first time. You will be asked by your tax software at some point to declare a "Principal Business or Professional Activity" code. These are 6-digit codes which are "based on the North American Industry Classification System (NAICS)". This isn't a super-critical piece of information - they have a 'catchall' option if you can't decide on one - but it's good to pick a more specific one if you can. It doesn't need to exactly match everything you do, just what you consider your primary (principal) self-employment activities, what you do the most. ("The activity from which the company [your self-employment] derives the largest percentage of its 'total receipts' [income].")

You can see a full list of the codes to choose from here: 2014 Instructions for Schedule C (2014): Principal Business or Professional Activity Codes, and this site has descriptions/definitions. Each worker needs to decide for *yourself* which code you want to use, based on your own types of work, but here are some possibilities to consider:

PS: I found an artist drew little cartoon people for every(?) Principal Business code in the list, in a 40-part series! :lol:
 
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From Jan 2015:

someone inquiring about an absurd illegal scheme with a side-order of not understanding the concept of tax brackets, wrote:

Log in or register now. to view Spoiler content!

" I realize that I could ask my friend to just set aside 15% for SE taxes. But we're at the point where his income would put us into a much higher tax bracket for all our income, so I'm reluctant to report it.

Thanks for any advice--even tough love. "​


Aside from the fact that you're breaking Amazon's MTurk TOS, and never know when the IRS may randomly decide to audit you, that's not how tax brackets work. As I wrote in Explanation of Deductions/Exemptions/Credits, Effective Tax Rates, and 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."​
 
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From Feb 2015:

wafflerun wrote:

" Forgive me if this was already mentioned somewhere and I missed it, but how exactly do you fill out schedule C for turk earnings? I'm using H&R Block, and it's asking for business name, product or service, and business code. What the heck do I fill in for that? "​

Your 'business' name is your name (Joe Smith or whatever), as a self-employed sole proprietor working under your own SSN rather than your own incorporated business -- and the tax forms generally say that if you don't have a separate business name, you should leave that field blank. Your business code is one of these: choosing a "Principal Business or Professional Activity" code , and you briefly summarize the type of services you provide in generic terms similar to the naming of those Principal Business Activity codes.
 
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From Feb 2015:

Update on the "where's the 2014 total already" situation: Someone said this afternoon (Feb 4, 2015) on Reddit that they sent MTurk support a message inquiring about this. They received this reply:

" Thanks for reaching out to us.

I'm sorry that the total earnings for 2014 has not yet been posted.

I've forwarded this to our developers to investigate and work toward a resolution. A fix should be implemented shortly.

Thanks in advance for your patience. "​

The commenter then made mention of employer reporting regulations, to which I responded:

Good to hear the message has been passed along, someone over there sure dropped the ball. But FWIW, legally their only reporting obligation is for the select few high earners who met the requirements for Amazon Payments to issue them a 1099-K. It's only a courtesy that the mturk dashboard provides total earnings data. As self-employed people, legally each mturk worker is responsible for keeping their own earnings records, and reporting all self-employment earnings on their taxes regardless of what is or isn't provided by the entities who paid them. Of course realistically, there's a ton of data for turkers to try to keep up with, and the fact that this has always been provided in previous years naturally leads to most people relying on it.​

If you've been turking for multiple years and you've gone by the dashboard's annual total earnings numbers in previous years, it'd be best to wait until they finally post that number and stick with that; as I've mentioned previously, the important thing is to maintain consistency in how you determine your totals from year to year so money doesn't fall between the cracks. But if 2014 was your first year, and you're willing to continue doing it yourself the same way in subsequent years, there are various ways you can add up your dashboard numbers, or Amazon Payments transfers, etc to arrive at a reasonable total.

[The 2014 'Show earnings details' totals were later posted on Feb 5, 2015.]
 
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From Feb 2015:

luckyboxes wrote:

" There really isn't anyway to reduce the federal social security / medicaid taxes is there? I look around but it doesn't seem like EITC or any other deductions apply. So no matter what you are giving them at least 16% even if your wages are so low you don't have to pay any other taxes?
My only income last year was the 2k~ i earned from mTurk.
Or am I missing something here.

Edit: Did a free TaxACT thing and it said I only owe like $136 in taxes. That doesn't seem right. It gave me some weird EIC credit... but afaik that doesn't affect Fica / SS.

Pretty sure I just owe the 15%~ off the top yeah? I don't know if I put something in wrong with TaxACT but I don't wanna screw myself here. Either by doing it wrong and getting it fined, or doing it wrong and sending them more money. "​

As explained in my 2nd tax info post Explanation of Deductions/Exemptions/Credits, Effective Tax Rates, and Tax Brackets, refundable credits like the Earned Income Tax Credit (EIC/EITC) *do* reduce all other taxes you would've owed. :thumb: You owe the 15.3% no matter what, but the refundable credit is automatically used to immediately pay it down.


luckyboxes then wrote:

" I did read this but still not entirely sure if I am understanding it right.

All of these credits affect what you pay in federal tax above and beyond the 15.3% rate that's required for social security etc, correct? And since my income was already so low that the standard deduction would qualify me for not having to file taxes then the EITC would do nothing for me. That tax for medicare and SS always has to be paid... it's just that if I had a job it'd be taken automatically and I wouldn't have to worry about it... I jus twouldn't have to pay anything additional.

As I understand it, there is nothing you can do to avoid paying the 15.3% self-employment tax. But there are things you can do to reduce your tax bill above those amounts, especially if you are in brackets above what the standard deduction takes care of. Is this correct? "​

Again, it's a FULLY REFUNDABLE credit. :listen: If you had earned the same amount of income as a part-time W2 employee (at Walmart or whatever), that EITC money would've been a refund check coming straight into your pocket, likely far more than the amount of taxes you'd paid in. Since your income was self-employment instead, the 15.3% self-employment tax bill gets reduced because the IRS uses the money that would've been your EITC refund check to pay down your tax bill, regardless of what type of taxes were in that bill. What Is the Earned Income Tax Credit?
 
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From Feb 2015:

Xandro wrote:

" What happens if I'm off on my numbers?
my 2014 dash says: $5,500.33
hitDB + dash bonus: $5,500.36
I ask in the event they want to audit and i have to turn in my HitDB numbers + bonus numbers. "​

luckyboxes wrote:

"Go with amazon. And its 3 cents lol. I'm pretty sure you round on your actual tax forms anyway right?"​

Jaded wrote:

" Hopefully they never audit me. My numbers have been wrong (according to my records) both years I've kept records >.> Both by about 60 dollars. "​

I don't know how the heck Amazon came up with their end-of-year numbers, but I had my records 100% reconciled, and their number is a dollar-and-change lower than mine. :dunno: I'm using my own numbers, personally. But like I've said before, if you've used the dashboard numbers for previous years and/or intend to continue using theirs in the future, and/or aren't as confident of your records as I am of mine, just go with the dashboard numbers. There are just too many ambiguous variations in how exactly to count the tons of tiny bits involved in this stuff.
 
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From Feb 2015:

ShrimpShackShooter wrote:

"... I have a full time job and mturk is going to be just for extra spending money. Will filing a schedule C next year effect the amount I am taxed in my regular job?
So assuming (not sure numbers are correct) 6% Employee and 6% Employer for being self employed is 12% of Mturk earnings.
will my tax at my regular job now be 12% since I filed a schedule C?
... just want to be sure I'm not losing money by trying to make money. "​

The money you earn at a W2 job continues to be taxed in the normal way you always have been. Only the money you earn from self-employment will have the additional self-employment tax (it's 7.65%+7.65%) applied to it. If you normally get a tax refund when you file, due to your W2 job's automatic withholding exceeding the amount that was needed to cover its taxes, that refund (or a portion of it) will automatically go towards paying the taxes you'd owe on the self-employment earnings.

It's not possible to 'lose money' overall by earning more in any way (W2 or self-employment), you will come out ahead by some amount. :)

[Addendum: It's not possible for most people, but the exception is unless you're in an uncommon situation where being over a certain income threshold causes you to lose some government benefit that is of greater value to you, and you don't expect to be able to go so far beyond that threshold that you'll make more than the value of the lost benefit. In that case, make sure you know what that threshold is for you, and STOP for the year before you get too close to it.]
 
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From Feb 2015:

Cryyo wrote:

" I'm thinking of getting a smartphone. If I turk on it, does that mean that next year I will be able to right off the cost of the smartphone and the monthly bill on my taxes so that it is essentially free? "​

Unless it's used exclusively for your self-employment work, you'd be asking for trouble: don't fabricate illegitimate business expense deductions .

And 'tax write-offs' doesn't make things free anyway, btw. It just means you don't owe taxes on that portion of your self-employment income (which is a much smaller percent than the 100% off that would make it free: Explanation of Deductions/Exemptions/Credits, Effective Tax Rates, and Tax Brackets); it doesn't reduce your taxes by that total amount.
 
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From Feb 2015:

VGB wrote:

" ... I am lucky to have the cushion of a pre-taxed paycheck so I can avoid paying quarterly taxes, but I owe quite the chunk of change to the feds. This is mostly due to my own fault, as I was claiming 0 on my paycheck through most of the year instead of 1 or 2, as I didn't account for mTurk to end up becoming a second substantial source of income originally, and reacted late. Lessons learned. "​

It's possible to have additional amounts withheld from your W2 paycheck to cover self-employment taxes, but it sounds like you're talking about the number of allowances/exemptions you claimed on Line 5 of your W4 for your W2 job, which has the opposite effect: "For each exemption you take, the government basically “exempts” a certain portion of your paycheck from being taxed [in the up-front withholdings], so the more exemptions you take, the less that comes out of each paycheck."

For the desired effect, you'd want to decide a dollar amount to state on Line 6 of your W4: "Line 6 requests additional amount you want withheld for each paycheck. Most people write “0”. If you expect you’ll owe a significant amount of federal taxes, you may want to calculate a dollar amount for line 6 so that you don’t owe the Internal Revenue Service (IRS) oodles of bucks at year-end."
 
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From Mar 2015:

jeffmangum wrote:

"What's amazon's EIN?"​

You shouldn't need Amazon's EIN. If you needed it, it would've been provided to you on a 1099-MISC. A 1099-MISC will not be provided to you, so you should be filing your MTurk income as business (self-employment) income not reported on a 1099, rather than trying to fabricate the information that would've been on a 1099. :wink:
 
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From Mar 2015:

Henrik wrote:

Log in or register now. to view Spoiler content!

Although I don't personally post my reports for other reasons, I don't think that's realistically something anyone needs to be concerned about. Most forum users have no public connection to their full real name for the IRS to even be aware of, and even a name is no proof of anything (there are plenty of people in the country with the same name, unless you have a very unusual name; and a name may be *someone's* real name while not being that of the person using it, there's no verification).

And besides the point that the IRS isn't out spying on forums and getting the NSA to track you down anyway, regardless of what other sources of income someone may have, I think turking is one of the most 'multi-documented' sources of non-1099-MISC self-employment income out there. Such weekly reports posts would have nothing to do with any other sources of income, and their contents would only be further corroborated by the other documentation every turker has - saved weekly reports emails, transfer confirmation emails, withdrawal confirmation emails, bank statements, dashboard annual totals, Amazon Payments history downloadable as CSVs, HitDB records, personal spreadsheets... Nobody's getting audited because they posted about a few hundred bucks on a pseudonymous forum, and if someone does get audited unrelated to that, you should have plenty of documentation as long as you haven't been trying to greatly mis-report your income.

Don't live in fear. Ten Red-Flags That Lead to IRS Audits: "The best defense against an audit is to be honest. Report all of your income. Don’t try to fudge things." (And the article reiterates what I keep telling people about not taking unwarranted 'business expense' deductions.)

And a good comment in response to that article: "I actually know a handful of revenue agents, although they audit businesses and not individuals. Here’s the thing: They want you to be in compliance. They do not go looking for errors that aren’t there or trying to ding you for the tiniest thing. If you are honest (even if you’re honestly clueless) they will try to help you."
 
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From Mar 2015:

thedorchannel wrote:

" hooly crap, does it make sense that I made a lil over 5 grand turking and I owe 1200 according to my first runthrough of turbotax business? "​

If you don't qualify for any refundable credits like the EITC to offset it, you will automatically owe at least the 15.3% 'self-employment' tax (soc sec + medicare contributions) on your earnings. And then particularly if you already have other income that MTurk is just adding on top of, there's the actual income tax.

Enter your information accurately in your tax software. If you don't like what it comes up with, try another company's tax software to compare. There are many variables involved.

[PS: do you need the most expensive tax software version? (no) ]
 
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From Mar 2015:

hollabm wrote:

" I haven't turked in a while and just remembered I had to file taxes. I'm currently a student and I made about 1.5k over the past year. I used Turbotax Freedom Edition and inputted my income into the "Miscellaneous Income, 1099-A, 1099-C" section of the Turbotax software. I also inputted information about financial aid I received from my 1098-T. However, once I reached the end it said I owed $0 in taxes which doesn't seem right to me. Am I supposed to input the amount I made on Mturk into a different section or something?

EDIT: Just tried some other online tax software/calculators and apparently there's a 6200 standard deduction so is that why it says I owe $0 in taxes? Also, the only money I made over the year was from Mturk so does that standard deduction apply to me? "​

Sounds like you didn't enter this in the correct place. Turking is self-employment ('business') income, which needs to be filed on Schedule C. This will generally result in you owing some amount of taxes (unless it's offset by returns you already had coming from other stuff).

And Turbotax will ask you to pay to upgrade to file self-employment income properly. I suggest switching to H&R Block Deluxe (which costs, but less than Turbotax would) or TaxAct (which might be entirely free if you don't need state taxes). Please read my detailed posts in the first few pages of this thread, starting at Self-Employment Tax Tips Key Points - start here.
 
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clickhappier

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From Apr 2015:

For future reference, the appropriate section in H&R Block's software for self-employment income not reported on a 1099-MISC (this is where MTurk income goes, since they don't send 1099-MISCs) is:

Federal -> Income -> Business, Rental, Partnership, Farm, and Royalties -> Your Own Business (Schedule C) -> [your business label here] -> Business Income.
(This is the section AFTER the one that asks about income reported on 1099-MISCs.)

You should go through all the questions the software asks in order, but it is possible to jump directly to that section (after you've created a business label for it to go under) using the 'Take Me To' button.
 
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From Apr 2015:

Dim wrote:

" So my 2014 taxes are complete and filed. Yay. But for 2015 I think I have to do quarterly payments. I've completed the estimate (via HR Block software) and printed vouchers and it's stupid question time! Do I just mail in the appropriate voucher and a check? The form says "Detach here and mail with your payment and return." I'm confused. "​

Yes, that's how you'd do it, if you want to do it with mailing in checks. But there's a new free way you can pay online instantly that they just introduced after last year's tax season... There's been a way to do that for years called the EFTPS but it's a hassle to get set up with the first time, takes a week or two waiting for them to mail you your activation code; it's primarily targeted for business that employ more than just yourself, but individuals can use it too. Now the new-and-improved option for individual taxpayers is IRS Direct Pay. It's very easy to use, you select that you're paying for 1040ES estimated payments, and you just need your personal info from a previous tax return to verify your identity, and the routing info for your checking account. Estimated payment for the first quarter of 2015 is due on April 15. :)
 
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