Summer Jobs

2007-06-14 by

Today TaxMama hears from Michelle in MN who wants to start out right. “If I were to earn summer income of $900 or less through casual labor, online surveys, mystery shopping, and garage/eBay sales, how should I go about reporting all this stuff? Would I have to establish myself as a business in order to do all this miscellaneous work even if some jobs don’t add up to more than $100? “

Well, Michelle,

You’re going to have a fun summer trying out all those adventures and getting paid for them. I used to spend my summers baby-sitting, selling Time-Life Books, being a candy girl and whatever else I could string together, too. Those are good memories.

Will you have to register as a business for all those little joblets? Not really. Not if the whole thing isn’t really going to add up to $1,000 or so. Even if you also do work over the winter holidays and pick up another few hundred dollars.

But, you will have to track the income and pay taxes on the profits. You’ll use Schedule C to report the income.
http://www.irs.gov/pub/irs-pdf/f1040sc.pdf

And you can deduct your out-of-pocket costs. Things like part of your phone bill and Internet (if you pay it yourself), supplies, your mileage (if you drive) or auto costs. If you don’t drive, but get around by bus, subway, train…those transportation costs or passes will be deductible.

Don’t forget the cost or value of the stuff you sell. Even if your parents have told you that you could sell off stuff from around the house, those things cost money. Find out their cost to your or your parents, or current fair market value (whichever is lower) and reduce your eBay profits by those amounts.

You may still end up with a small profit. You won’t owe any income tax. But you will find yourself paying a small amount into Social Security via your Self-Employment taxes of 15.3%.
http://www.irs.gov/pub/irs-pdf/f1040sse.pdf

You can learn more about all this in IRS Publication 334, for Small Businesses.
http://www.irs.gov/publications/p334/index.html

Or of course, you can invest in a copy of Small Business Taxes Made Easy – which is a deductible cost. Who knows, once you read it, you might decide you want to pick up extra money helping your friends do tax returns!

And remember, you’ll find answers to lots of questions, about your teen businesses and other tax information, free. Where? At TaxMama.com

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  1. John Weaver EA Says:
    June 14th, 2007 at 04:38 pm

    If Michelle can keep her Sch C net profit below $432.00 then no social security self-employment tax would be due either.

    I believe for the 2007 tax year to accumulate one quarter of social security coverage a taxpayer would have to have $1000 in wages or the equivelent of $1000 OR $1082 in net earning from self-employment to qualify for even one quarter of SS coverage.

    Ironically, you pay SE taxes on any net profit over $432.00 BUT still don't received any quarters of coverage.

    If this is a one time, one shot activity Michelle may be able to argue the Batok tax court Memo. case to exclude her one-time SE earnings if they are over $432.00 for the year. The argument under Batok would be her activity did not rise to the level of a trade or business under IRC 1402 to require SE tax liability.

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