So I read that if you’re self-employed and make less than $400, you don’t have to pay taxes. But what does ‘less than $400’ even mean? Is it $400 a month, $400 a year? Why aren’t these things taught in school? I’m 20 and I feel like I’m just stumbling through life trying to figure out basic stuff like money and taxes.
It’s $400 for the year. You can check out IRS Publication 17 for the details:
Chen said:
It’s $400 for the year. You can check out IRS Publication 17 for the details:
Thanks for linking it! I didn’t even know where to begin with this stuff.
I totally agree that schools should teach this stuff, but let’s be real—most high schoolers wouldn’t pay attention to a tax class anyway. College might help more, but even then, it’s hit or miss.
As for your main question: $400 per year is the threshold. Most of the IRS rules are based on an annual income, since taxes are filed for the year.
If you’re looking to learn more about money and adulting, you might want to check out the personal finance resources online. They’re super helpful for beginners. I didn’t learn much from school or family either, so I’ve had to figure it out on my own. This forum has been a lifesaver too!
It’s $400 for the whole year.
Technically, any income you earn as a sole proprietor should be reported on your Schedule C. For example, if you drive for Uber and earn over $600, they’ll send you a 1099-NEC that also goes to the IRS.
If you earn less than $600, Uber doesn’t send a 1099, but legally, you’re still supposed to report it. A lot of people don’t because they either don’t understand the law or they choose not to.
@Luca
Not reporting income isn’t just avoiding taxes—it’s tax fraud. Tax avoidance is when you use legal strategies to reduce your taxes, like taking deductions.
@Luca
So, let’s say I sell some stuff at the market and only deal in cash—could I just not report that without getting into trouble?
Rowan said:
@Luca
So, let’s say I sell some stuff at the market and only deal in cash—could I just not report that without getting into trouble?
You could technically avoid reporting it, but there are consequences. For one, you wouldn’t earn Social Security credits because you’re not paying into the system. Also, if you get audited, they might check your bank statements, and the penalties for not reporting income are pretty steep.
@Sam
Yikes, that doesn’t sound worth it.
Rowan said:
@Luca
So, let’s say I sell some stuff at the market and only deal in cash—could I just not report that without getting into trouble?
Not reporting it would technically be a federal crime. While it’s unlikely you’d get caught, there are reasons to report income. For example, it helps when applying for loans or when you’re trying to build up Social Security benefits. Skipping taxes might save you money now, but it could hurt you in other ways.
@Luca
Some people get caught because they deposit unreported cash into their bank accounts or list it on loan applications. If it’s documented somewhere, the IRS can find it.
Rowan said:
@Luca
So, let’s say I sell some stuff at the market and only deal in cash—could I just not report that without getting into trouble?
Could you avoid reporting cash? Sure. Would you get away with it? Probably. But it’s still tax fraud. And if you get audited, you’d owe penalties and interest. It’s kind of like speeding—you might not get caught, but if you do, it’s not going to be cheap.
@Denny
So is it like going a few miles over the speed limit where no one really cares?
Rowan said:
@Luca
So, let’s say I sell some stuff at the market and only deal in cash—could I just not report that without getting into trouble?
It depends. If you’re reselling things for less than what you paid for them, you don’t owe taxes. But if you’re making a profit, like knitting and selling handmade items, you’d have to pay taxes on that income.
Rowan said:
@Luca
So, let’s say I sell some stuff at the market and only deal in cash—could I just not report that without getting into trouble?
The IRS doesn’t just look at your bank accounts—they also look at your lifestyle. If you’re living in a mansion with fancy cars but claim zero income, that’s going to raise red flags.
@Luca
Do I need to do a Schedule C if I don’t have business expenses? I did some tutoring and got a 1099-NEC, but I don’t consider myself a business owner.
Thorne said:
@Luca
Do I need to do a Schedule C if I don’t have business expenses? I did some tutoring and got a 1099-NEC, but I don’t consider myself a business owner.
If you’re self-employed, the IRS considers you a business, even if you don’t have expenses.
Thorne said:
@Luca
Do I need to do a Schedule C if I don’t have business expenses? I did some tutoring and got a 1099-NEC, but I don’t consider myself a business owner.
Your tutoring work makes you self-employed, so yeah, it counts as a business for tax purposes.
@Luca
Some places send 1099s even if you make less than $600. If they do, you should get it by March.