Do I Have To Report Income Less Than $100? Tax Filing Guide

Do I Have To Report Income Less Than 0? Yes, you generally must report all income, regardless of the amount, to the IRS and state tax agencies, and income-partners.net is here to guide you through the ins and outs of income reporting to ensure compliance and potential tax savings. Navigating the complexities of tax laws can be daunting, but understanding your reporting responsibilities is crucial for financial health. We’ll explore the specific requirements, exceptions, and best practices for reporting even small amounts of income, helping you avoid penalties and stay on top of your financial obligations. Dive into details about tax compliance, income thresholds, and reporting obligations.

1. Understanding Your Tax Obligations: A Comprehensive Guide

The question “Do I have to report income less than $100?” is a common one, especially for those new to the workforce or with sporadic income streams. The answer is generally yes. Regardless of how small the amount might seem, the Internal Revenue Service (IRS) requires you to report all income you receive unless specifically excluded by law. This section dives into the intricacies of this requirement, offering clear guidelines and practical advice.

1.1. The General Rule: All Income Is Taxable

The fundamental principle of taxation is that all income is taxable unless explicitly excluded by law. According to the IRS, gross income includes “all income from whatever source derived,” encompassing wages, salaries, tips, interest, dividends, rental income, and even income from side hustles or freelance work. The key takeaway is that there is no minimum income threshold that exempts you from reporting.

1.1.1. Examples of Taxable Income

Wages and Salaries: Any payment you receive for work performed as an employee.
Tips: Cash or non-cash tips received from customers.
Interest: Income earned from savings accounts, certificates of deposit (CDs), or bonds.
Dividends: Payments from stock ownership.
Rental Income: Money earned from renting out property.
Freelance or Gig Work Income: Payments received for services provided as an independent contractor.
Bartering Income: The fair market value of goods or services you receive in exchange for your services.

Income Taxable

1.1.2. Reporting Thresholds vs. Taxability

While there isn’t a minimum income that exempts you from reporting, there are thresholds that determine whether you need to file a tax return. For example, for the 2023 tax year, the standard deduction for single filers is $13,850. If your total income is less than this amount, you might not be required to file a tax return. However, this doesn’t mean you don’t have to report all your income if you do file. Even if your income is below the filing threshold, you might still want to file a return to claim a refund of any taxes withheld from your paychecks or to claim certain refundable credits like the Earned Income Tax Credit (EITC).

1.2. Exceptions to the Rule: What Income Is Not Taxable?

While most income is taxable, there are some notable exceptions. Understanding these exceptions can help you accurately report your income and avoid overpaying taxes.

1.2.1. Gifts and Inheritances

Generally, gifts you receive are not considered taxable income. According to the IRS, a gift is “any transfer to an individual, either directly or indirectly, where full consideration (payment of equal value) is not received in return.” However, there are exceptions:

Gift Tax: The person giving the gift might be subject to gift tax if the gift exceeds a certain amount ($17,000 per recipient in 2023).
Inheritances: Inherited assets are not considered taxable income, but the estate might be subject to estate tax.

1.2.2. Certain Scholarship and Grant Amounts

Scholarships and grants used for tuition, fees, books, and supplies required for courses at an educational institution are generally tax-free. However, if the scholarship or grant covers room and board or other incidental expenses, those amounts are considered taxable income.

1.2.3. Qualified Disaster Relief Payments

Payments received as qualified disaster relief are not taxable income. These payments are designed to help individuals recover from a qualified disaster, such as a hurricane, earthquake, or flood.

1.2.4. Child Support Payments

Child support payments are not considered taxable income to the recipient or deductible by the payer.

1.2.5. Certain Life Insurance Proceeds

Life insurance proceeds received due to the death of the insured are generally not taxable. However, any interest earned on the proceeds after the death of the insured is taxable.

1.3. Why Reporting Even Small Amounts of Income Matters

Even if you think the amount is too small to matter, reporting all income is crucial for several reasons:

Compliance with the Law: Failure to report income, even small amounts, can lead to penalties, interest, and even legal trouble with the IRS.
Accuracy in Financial Records: Reporting all income ensures that your financial records are accurate and complete, which is essential for various financial transactions, such as applying for loans or mortgages.
Eligibility for Tax Benefits: By reporting all income, you can accurately calculate your eligibility for various tax deductions and credits, potentially reducing your overall tax liability.
Building a Credit History: Reporting income can help you build a credit history, especially if you’re self-employed or a freelancer. Lenders often require proof of income when you apply for credit.
Avoiding Audits: Underreporting income can increase your chances of being audited by the IRS. Reporting all income, even small amounts, can help you avoid this stressful and time-consuming process.

1.4. How to Report Small Amounts of Income

Reporting small amounts of income is generally straightforward. The process varies depending on the type of income you’re reporting.

1.4.1. Reporting Income on Form 1040

The primary form for reporting income is Form 1040, U.S. Individual Income Tax Return. Here’s how to report different types of income on this form:

Wages and Salaries: Report your wages and salaries on line 1 of Form 1040. You’ll find this information on Form W-2, which your employer provides.
Interest Income: Report taxable interest income on Schedule B (Form 1040), Interest and Ordinary Dividends.
Dividend Income: Report ordinary dividends on Schedule B (Form 1040).
Self-Employment Income: Report income from self-employment on Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship).
Rental Income: Report rental income on Schedule E (Form 1040), Supplemental Income and Loss.

1.4.2. Using Form 1099 for Reporting

If you’re self-employed or a freelancer, you might receive Form 1099-NEC, Nonemployee Compensation, from clients who paid you $600 or more during the year. Report this income on Schedule C (Form 1040). Even if you don’t receive a 1099-NEC, you’re still required to report all self-employment income.

Form 1099 for Reporting

1.4.3. Keeping Accurate Records

The key to accurately reporting income is to keep detailed and organized records. This includes:

Tracking All Income: Use a spreadsheet or accounting software to track all income you receive throughout the year.
Saving Documentation: Keep copies of all income-related documents, such as W-2s, 1099s, receipts, and invoices.
Categorizing Expenses: If you’re self-employed, track your business expenses carefully. You can deduct these expenses from your income, reducing your tax liability.

1.5. Seeking Professional Advice

Navigating the complexities of tax law can be challenging, especially if you have multiple income streams or complex financial situations. Consider seeking advice from a qualified tax professional who can provide personalized guidance and help you accurately report your income.

1.5.1. Benefits of Hiring a Tax Professional

Expert Knowledge: Tax professionals have in-depth knowledge of tax laws and regulations, ensuring you comply with all requirements.
Personalized Advice: They can provide personalized advice tailored to your specific financial situation.
Tax Planning: They can help you develop tax planning strategies to minimize your tax liability.
Audit Assistance: If you’re audited by the IRS, a tax professional can represent you and help you navigate the audit process.

1.5.2. Finding a Qualified Tax Professional

Check Credentials: Look for tax professionals who are Enrolled Agents (EAs), Certified Public Accountants (CPAs), or tax attorneys.
Ask for Referrals: Ask friends, family, or colleagues for referrals.
Read Reviews: Check online reviews and ratings to get an idea of their reputation and service quality.

By understanding your tax obligations and reporting all income, regardless of the amount, you can ensure compliance with the law, avoid penalties, and accurately calculate your tax liability. Remember to keep detailed records and seek professional advice when needed.

2. Decoding Income Thresholds: What Triggers a Filing Requirement?

While you generally must report all income, knowing the specific income thresholds that trigger a filing requirement is essential. These thresholds vary based on your filing status, age, and dependency status. This section breaks down these thresholds, offering clear guidance to help you determine whether you need to file a tax return.

2.1. Standard Deduction and Filing Thresholds

The standard deduction is a set amount that taxpayers can deduct from their adjusted gross income (AGI) to reduce their tax liability. The IRS adjusts these amounts annually for inflation. The standard deduction amounts for the 2023 tax year are:

Filing Status	Standard Deduction
Single	$13,850
Married Filing Separately	$13,850
Married Filing Jointly	$27,700
Qualifying Widow(er)	$27,700
Head of Household	$20,800

If your gross income is less than your standard deduction, you generally don’t have to file a tax return. However, there are exceptions, which we’ll discuss later in this section.

2.2. Additional Standard Deduction for Those Age 65 or Older

If you are age 65 or older, you are entitled to an additional standard deduction. For the 2023 tax year, the additional standard deduction amounts are:

Filing Status	Additional Standard Deduction (Single)	Additional Standard Deduction (Married Filing Jointly)
Single	$1,850	N/A
Married Filing Separately	$1,500	$1,500
Married Filing Jointly	N/A	$1,500
Qualifying Widow(er)	N/A	$1,500
Head of Household	$1,850	N/A

If you are both age 65 or older and blind, you get two additional standard deductions.

2.3. Special Rules for Dependents

If someone can claim you as a dependent, the rules for determining whether you need to file a tax return are different. As a dependent, you must file a tax return if you meet any of the following conditions:

Unearned Income: Your unearned income (such as interest, dividends, or capital gains) was more than $1,150.
Earned Income: Your earned income (such as wages, salaries, or tips) was more than $13,850.
Both Earned and Unearned Income: Your gross income (earned and unearned) was more than the larger of $1,150 or your earned income (up to $13,850) plus $400.

2.4. Situations Requiring You to File Even If Below the Threshold

Even if your income is below the standard deduction, certain situations require you to file a tax return. These include:

Self-Employment Income: If your net earnings from self-employment were $400 or more, you must file a tax return and pay self-employment tax.
Special Taxes: If you owe any special taxes, such as alternative minimum tax (AMT), you must file a tax return.
Advanced Payments of Premium Tax Credit: If you received advance payments of the premium tax credit to help pay for health insurance purchased through the Health Insurance Marketplace, you must file a tax return to reconcile the credit.
Household Employment Taxes: If you were a household employer who paid cash wages to a household employee, you must file a tax return to report and pay household employment taxes.
Social Security or Medicare Tax: If Social Security or Medicare tax was withheld from your pay, you should file a tax return to claim a refund.
Earned Income Tax Credit (EITC): Even if your income is below the filing threshold, you might want to file a tax return to claim the EITC, a refundable tax credit for low- to moderate-income workers and families.

2.5. State Filing Requirements

In addition to federal filing requirements, you also need to consider state filing requirements. Each state has its own income tax laws and filing thresholds. Check with your state’s tax agency to determine whether you need to file a state income tax return. For example, the Virginia Department of Taxation requires you to file a state income tax return if your gross income exceeds the state’s filing threshold, which may be different from the federal threshold.

2.6. Examples to Illustrate Filing Requirements

Let’s look at a few examples to illustrate how these filing requirements work:

Example 1: Single Individual
- Sarah is single, 28 years old, and earned $12,000 in wages in 2023. Her income is below the standard deduction of $13,850. However, she had federal income tax withheld from her paychecks. She should file a tax return to claim a refund of the withheld taxes.
Example 2: Self-Employed Individual
- John is single, 35 years old, and had $500 in net earnings from self-employment in 2023. Even though his income is below the standard deduction, he must file a tax return and pay self-employment tax because his net earnings from self-employment were $400 or more.
Example 3: Dependent
- Emily is 17 years old and can be claimed as a dependent by her parents. She earned $2,000 in wages and $500 in interest income in 2023. Her unearned income is more than $1,150, so she must file a tax return.
Example 4: Individual Over 65
- Robert is single, 68 years old, and earned $15,000 in wages in 2023. His standard deduction is $13,850 plus an additional $1,850 for being over 65, totaling $15,700. Since his income is below this amount, he is not required to file a tax return unless he meets one of the other conditions, such as owing self-employment tax.

2.7. Resources for Determining Filing Requirements

IRS Website: The IRS website (www.irs.gov) provides detailed information on filing requirements, standard deduction amounts, and other tax-related topics.
IRS Publications: IRS Publication 17, Your Federal Income Tax, is a comprehensive guide to federal income tax rules.
Tax Software: Tax software programs can help you determine whether you need to file a tax return based on your income and other factors.
Tax Professionals: A qualified tax professional can provide personalized advice and help you navigate the complexities of filing requirements.

Understanding income thresholds and filing requirements is crucial for tax compliance. Be sure to consider your filing status, age, dependency status, and any special circumstances that might require you to file even if your income is below the standard deduction.

3. The $600 Rule and Form 1099-NEC: What You Need To Know

The “$600 rule” is a common topic of confusion for many taxpayers, especially those who are self-employed or work as independent contractors. This rule relates to when businesses are required to issue Form 1099-NEC, Nonemployee Compensation, to individuals they’ve paid for services. This section clarifies the $600 rule, explaining its implications and how it affects your tax reporting responsibilities.

3.1. What Is the $600 Rule?

The $600 rule states that businesses must issue Form 1099-NEC to any individual (who is not an employee) they have paid $600 or more during the tax year for services. This includes independent contractors, freelancers, consultants, and other self-employed individuals. The purpose of Form 1099-NEC is to report nonemployee compensation to the IRS and to provide a copy to the recipient, allowing them to accurately report their income on their tax return.

3.1.1. Who Must Issue Form 1099-NEC?

Any business that pays an independent contractor $600 or more for services must issue Form 1099-NEC. This includes:

Corporations: Both C corporations and S corporations.
Partnerships: General partnerships, limited partnerships, and limited liability partnerships (LLPs).
Limited Liability Companies (LLCs): LLCs that are taxed as corporations or partnerships.
Sole Proprietorships: Businesses owned and run by one person.
Nonprofit Organizations: Charities, foundations, and other nonprofit entities.
Government Agencies: Federal, state, and local government agencies.

3.1.2. What Types of Payments Are Reported on Form 1099-NEC?

Form 1099-NEC is used to report payments for services provided by nonemployees. This includes:

Professional Fees: Payments to lawyers, accountants, consultants, and other professionals.
Service Fees: Payments to contractors, subcontractors, and freelancers for services rendered.
Commissions: Payments to sales representatives and other individuals for sales commissions.
Other Compensation: Any other payments for services provided by nonemployees.

3.2. Understanding Form 1099-NEC

Form 1099-NEC provides essential information for both the payer and the recipient. Here’s what you need to know about this form:

3.2.1. Key Information on Form 1099-NEC

Payer Information: The name, address, and Taxpayer Identification Number (TIN) of the business that made the payment.
Recipient Information: Your name, address, and TIN (Social Security Number (SSN) or Employer Identification Number (EIN)).
Amount Paid: The total amount of payments made to you during the tax year.
Federal Income Tax Withheld: If any federal income tax was withheld from your payments (due to backup withholding), the amount withheld will be shown on the form.

Form 1099-NEC

3.2.2. Deadlines for Issuing and Filing Form 1099-NEC

To Recipients: Businesses must furnish Form 1099-NEC to recipients by January 31 of the year following the payment. For example, for payments made in 2023, the form must be provided to recipients by January 31, 2024.
To IRS: Businesses must file Form 1099-NEC with the IRS by January 31 of the year following the payment. This deadline applies whether the form is filed electronically or by paper.

3.3. How the $600 Rule Affects You

The $600 rule has several implications for both businesses and independent contractors:

3.3.1. For Businesses

Tracking Payments: Businesses must track payments to independent contractors to determine whether they meet the $600 threshold.
Collecting Taxpayer Information: Businesses must collect taxpayer information (name, address, and TIN) from independent contractors before making payments. This is typically done using Form W-9, Request for Taxpayer Identification Number and Certification.
Issuing Forms 1099-NEC: Businesses must issue Form 1099-NEC to recipients and file a copy with the IRS by the deadlines.
Penalties for Noncompliance: Businesses that fail to comply with the $600 rule can be subject to penalties from the IRS.

3.3.2. For Independent Contractors

Reporting Income: You must report all income you receive as an independent contractor, regardless of whether you receive Form 1099-NEC.
Tracking Income: It’s essential to keep accurate records of all income you receive, even if it’s less than $600 from a single client.
Self-Employment Tax: If your net earnings from self-employment are $400 or more, you must pay self-employment tax (Social Security and Medicare taxes).
Deducting Business Expenses: You can deduct business expenses from your self-employment income, reducing your tax liability.

3.4. What If You Don’t Receive a 1099-NEC?

Even if you don’t receive Form 1099-NEC, you’re still required to report all your income. The IRS expects you to report all income, regardless of whether you receive a form.

3.4.1. How to Report Income Without Form 1099-NEC

If you don’t receive Form 1099-NEC, you can still report your income on Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship). Use your own records to determine the amount of income you received. Be sure to keep accurate records of all income and expenses in case the IRS asks for documentation.

3.4.2. Reasons Why You Might Not Receive Form 1099-NEC

Payments Below $600: If you received less than $600 from a single client during the tax year, they are not required to issue Form 1099-NEC.
Misclassification: The business might have misclassified you as an employee instead of an independent contractor.
Errors: The business might have made an error and failed to issue the form.

3.5. Best Practices for Independent Contractors

Keep Accurate Records: Maintain detailed records of all income and expenses.
Use Accounting Software: Consider using accounting software to track your income and expenses.
Invoice Clients: Use professional invoices to track payments and provide documentation to clients.
Save All Documentation: Save all receipts, invoices, and other documentation related to your business.
Consult a Tax Professional: Seek advice from a qualified tax professional to ensure you’re complying with all tax requirements.

3.6. Resources for Independent Contractors

IRS Website: The IRS website (www.irs.gov) provides information on self-employment taxes, deductions, and other tax-related topics.
IRS Publication 334: Tax Guide for Small Business provides detailed information on tax rules for small businesses and self-employed individuals.
Small Business Administration (SBA): The SBA (www.sba.gov) offers resources and support for small businesses.

Understanding the $600 rule and Form 1099-NEC is crucial for both businesses and independent contractors. By following these guidelines, you can ensure compliance with tax laws and accurately report your income.

4. Self-Employment Income Under $400: Reporting Requirements

Self-employment income, even if it’s less than $400, comes with specific reporting requirements. While it might seem insignificant, failing to report this income can lead to penalties and other complications. This section explains the reporting requirements for self-employment income under $400 and provides guidance on how to handle these situations.

4.1. The $400 Threshold for Self-Employment Tax

The key threshold to remember is $400. If your net earnings from self-employment are $400 or more, you are required to file a tax return and pay self-employment tax. Self-employment tax consists of Social Security and Medicare taxes, which are typically withheld from employees’ wages but must be paid directly by self-employed individuals.

4.1.1. What Counts as Self-Employment Income?

Self-employment income includes any income you earn from running a business as a sole proprietor, partner, or independent contractor. This can include:

Freelance Work: Payments for writing, editing, graphic design, web development, and other freelance services.
Gig Economy Income: Earnings from driving for ride-sharing services, delivering food, or performing tasks on online platforms.
Direct Sales: Income from selling products directly to customers, such as through multi-level marketing (MLM) or online marketplaces.
Consulting: Fees earned from providing professional advice or consulting services.
Rental Income: Net income from renting out property (if you provide substantial services to tenants).

4.1.2. Calculating Net Earnings from Self-Employment

To determine whether your net earnings from self-employment are $400 or more, you must subtract your business expenses from your gross income. Here’s how to calculate your net earnings:

Gross Income: Add up all the income you received from your self-employment activities.
Business Expenses: Identify and deduct all eligible business expenses. These can include:
- Advertising: Costs for advertising your business.
- Supplies: Expenses for office supplies, tools, and other materials.
- Home Office Deduction: If you use a portion of your home exclusively and regularly for business, you can deduct a portion of your mortgage interest, rent, utilities, and other home-related expenses.
- Vehicle Expenses: Costs for using your vehicle for business purposes, such as mileage, gas, and repairs.
- Professional Fees: Payments to lawyers, accountants, and other professionals.
Net Earnings: Subtract your total business expenses from your gross income.

If the result is $400 or more, you must file a tax return and pay self-employment tax.

4.2. Reporting Requirements for Self-Employment Income Under $400

Even if your net earnings from self-employment are less than $400, you are still required to report the income on your tax return if your gross income is high enough to require you to file.

4.2.1. Filing Schedule C (Form 1040)

You will report your self-employment income and expenses on Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship). This form allows you to calculate your net profit or loss from your business.

Filing Schedule C (Form 1040)

4.2.2. Paying Self-Employment Tax

If your net earnings are $400 or more, you will also need to file Schedule SE (Form 1040), Self-Employment Tax, to calculate the amount of self-employment tax you owe. The self-employment tax rate is 15.3%, which consists of 12.4% for Social Security and 2.9% for Medicare.

4.2.3. Deducting One-Half of Self-Employment Tax

You can deduct one-half of your self-employment tax from your gross income. This deduction is taken on Form 1040, reducing your adjusted gross income (AGI) and your overall tax liability.

4.3. Examples of Reporting Self-Employment Income Under $400

Let’s look at a few examples to illustrate how these reporting requirements work:

Example 1:
- Maria earned $800 from freelance writing but had $500 in business expenses (such as a computer, software, and internet). Her net earnings are $300, which is less than $400. However, her gross income exceeds the standard deduction, so she must file Schedule C to report her income and expenses. She does not need to file Schedule SE because her net earnings are less than $400.
Example 2:
- David earned $1,000 from driving for a ride-sharing service but had $700 in business expenses (such as gas, maintenance, and depreciation on his vehicle). His net earnings are $300, which is less than $400. However, his gross income exceeds the standard deduction, so he must file Schedule C to report his income and expenses. He does not need to file Schedule SE because his net earnings are less than $400.
Example 3:
- Samantha earned $500 from selling handmade crafts online but had $200 in business expenses (such as supplies and advertising). Her net earnings are $300, which is less than $400. However, her gross income exceeds the standard deduction, so she must file Schedule C to report her income and expenses. She does not need to file Schedule SE because her net earnings are less than $400.

4.4. Benefits of Reporting Self-Employment Income

Even if you don’t owe self-employment tax, there are several benefits to reporting your self-employment income:

Building Social Security Benefits: Reporting self-employment income helps you build credits toward Social Security retirement, disability, and survivor benefits.
Qualifying for the Earned Income Tax Credit (EITC): If you have low to moderate income, reporting your self-employment income can help you qualify for the EITC, a refundable tax credit that can significantly reduce your tax liability.
Avoiding Penalties: Failure to report self-employment income can result in penalties and interest from the IRS.
Establishing a Business History: Reporting your self-employment income helps establish a business history, which can be useful when applying for loans or credit.

4.5. Resources for Self-Employed Individuals

IRS Website: The IRS website (www.irs.gov) provides detailed information on self-employment taxes, deductions, and other tax-related topics.
IRS Publication 334: Tax Guide for Small Business provides detailed information on tax rules for small businesses and self-employed individuals.
Small Business Administration (SBA): The SBA (www.sba.gov) offers resources and support for small businesses.
National Association for the Self-Employed (NASE): NASE (www.nase.org) provides resources and support for self-employed individuals.

4.6. Common Mistakes to Avoid

Failing to Report All Income: Make sure to report all self-employment income, even if it’s less than $400.
Not Keeping Accurate Records: Keep detailed records of all income and expenses.
Missing Deductions: Take advantage of all eligible business deductions.
Not Paying Estimated Taxes: If you expect to owe $1,000 or more in taxes, make estimated tax payments throughout the year to avoid penalties.

Understanding the reporting requirements for self-employment income under $400 is crucial for tax compliance. By following these guidelines, you can ensure that you’re accurately reporting your income and avoiding penalties.

5. Gig Economy Income and Taxes: What You Need to Know

The gig economy has transformed the way many people earn income, offering flexible work arrangements and diverse opportunities. However, gig economy income also comes with specific tax obligations that you need to understand. This section provides a comprehensive overview of gig economy income and taxes, helping you navigate the complexities of reporting and paying taxes on your earnings.

5.1. What Is the Gig Economy?

The gig economy refers to a labor market characterized by short-term contracts or freelance work, as opposed to permanent jobs. Gig workers are typically independent contractors who provide services to clients or customers through online platforms or directly. Common examples of gig economy work include:

Ride-Sharing: Driving for services like Uber or Lyft.
Delivery Services: Delivering food or packages for companies like DoorDash or Grubhub.
Freelance Work: Providing services like writing, editing, graphic design, or web development on platforms like Upwork or Fiverr.
Online Marketplaces: Selling goods or services on platforms like Etsy or Amazon.
Task-Based Work: Completing tasks on platforms like TaskRabbit or Amazon Mechanical Turk.

5.2. Understanding Your Tax Obligations as a Gig Worker

As a gig worker, you are considered self-employed, which means you are responsible for paying your own Social Security and Medicare taxes (self-employment tax) as well as income tax. Here’s what you need to know about your tax obligations:

5.2.1. Self-Employment Tax

Self-employment tax consists of Social Security and Medicare taxes. As an employee, these taxes are typically withheld from your paycheck, with your employer paying half of the tax. As a self-employed individual, you are responsible for paying both the employee and employer portions of these taxes. The self-employment tax rate is 15.3%, which includes 12.4% for Social Security and 2.9% for Medicare. You only pay Social Security tax on earnings up to the annual Social Security wage base, which is $160,200 for 2023.

5.2.2. Income Tax

In addition to self-employment tax, you are also responsible for paying income tax on your net earnings from self-employment. Your income tax rate will depend on your taxable income and filing status.

5.2.3. Estimated Taxes

Because taxes are not automatically withheld from your gig economy income, you may need to make estimated tax payments throughout the year to avoid penalties. The IRS generally requires you to pay estimated taxes if you expect to owe $1,000 or more in taxes for the year. Estimated taxes are paid quarterly, and the due dates are typically:

April 15
June 15
September 15
January 15 of the following year

5.3. Reporting Gig Economy Income

You will report your gig economy income and expenses on Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship). This form allows you to calculate your net profit or loss from your business.

Schedule C (Form 1040)

5.3.1. Using Form 1099-NEC

If you earned $600 or more from a single client or platform, you will likely receive Form 1099-NEC, Nonemployee Compensation. This form reports the amount you were paid for your services. You will use the information on Form