We’ve briefly touched on the topic of paying income taxes on eBay sales in the past, but a lot of people are unsure as to whether additional income in general needs to be reported to the IRS. By additional income, I’m referring to anything that’s not part of your usual pay packet, which can include money making activities such as eBay and Amazon sales, completing online surveys, mystery shopping and babysitting. Contrary to popular opinion, the IRS will expect to be informed of all additional income — even if it falls under the taxable threshold or is not subject to tax.
Photo by sercasey via Flickr
Here are a few examples of additional income sources that you may encounter:
Generally speaking, how you should go about declaring additional income depends on the activity in question but in most cases, it should be declared on specific forms. For example, childcare providers who are deemed to be self-employed should fill in one of the following forms to declare additional income from baby-sitting services: Schedule C Profit or Loss From Business (Form 1040) or Schedule C-EZ Net Profit From Business (Form 1040).
If your additional income should be subject to tax but isn’t declared, expect the IRS to pursue you for the debt if it comes to their attention. This tax debt will probably be due straight away, although you may be able to negotiate on this if you can prove that you are experiencing financial difficulties.