Key Takeaways
- There are many surprising ways someone can be considered self-employed, such as selling homemade goods, buying and selling items, and taking care of pets.
- Even if income is earned through unconventional means, it likely needs to be reported for tax purposes and may be subject to self-employment tax.
- Some activities, like selling old possessions, may only qualify as self-employment if they are a regular source of income.
- Forms like 1099-MISC, 1099-NEC, and 1099-K are often used by businesses to document payments made to self-employed individuals.
1. You sell homemade goods
If you put your cooking skills to work by selling goods that you made, you'll need to report the income you earned from it. Unless you sold goods for a non-profit organization, such as a church bake sale, for which you didn't keep the profit, you will likely owe taxes on the earnings. For example:
- Say you baked seasonal apple pies and sold them at your local farmer’s market last fall.
- You earned $1,000, and your expenses, including the baking supplies, ingredients, and your farmer’s market fee, and display totaled $300.
- You would owe taxes on the difference of $700.
- Since your profit is greater than $400, you will also need to calculate self-employment tax on your earnings.
2. You buy and sell stuff
Did you buy something in bulk dirt cheap and then find out you could resell it at a profit? Whether you sold plastic ponchos on a rainy day in San Diego, or some rare flea market finds on the Internet, recurring sales or purchases for resale could be taxable.
It boils down to whether you're running a business or simply entertaining a hobby. The IRS considers factors like these to differentiate the two:
- you sell in a business-like manner
- you spend a considerable amount of time selling
- you depend on the profits for your livelihood
3. You profit from your creativity
Creating logos for others, writing content for websites, and taking or selling photographs for third parties can make you self-employed. Depending on your expertise as a graphic designer, you can earn between $50 and $1,000 for creating business logos.
Subjects from travel to parenting afford many opportunities for writers to make a little extra money from their hobbies or areas of expertise. Photographers can also make money taking event photos, selling prints, teaching, and running photo tours. Other work that can fall into the self-employed creative category includes:
- musicians
- fashion designers
- crafters
- fine artists
4. You sell your old stuff as a business
Whether you're saying goodbye to your most prized childhood possessions or old items from the closet, selling your stuff can be a form of self-employment. Amazon, eBay, Craigslist, and other e-commerce websites and apps give your goods great exposure and make the selling process relatively safe and easy. If you have entered this as a business you need to report the income and if you made $400 or more doing this, you need to file Schedule SE to calculate your self-employment tax.
Selling your stuff at swap meets, garage sales, or through a third party such as a consignment store, might mean you're self-employed for tax purposes if you do it as a regular source of income.
5. You take care of pets
Taking care of people's pets for pay can be self-employed income. These common pet-friendly gigs could require you to pay taxes:
- dog walker
- pet sitter
- dog trainer
- groomer
You can usually deduct common and ordinary expenses that you incur in your pet business such as vehicle expenses for mileage between your home and your clients' homes. You can also deduct ordinary and necessary supplies such as:
- animal food
- pet products
- advertising
- office or storage space for your business
6. You work in rideshare
Driving for companies like Uber and Lyft is a popular on-demand gig that allows you to make money part- or full-time, any time of day or night. As a rideshare driver, you can deduct the portion of your vehicle expenses that you use to give rides.
For example, if you used your car for a rideshare gig 50% of the time (50% of the annual miles) last year, you can deduct half of your vehicle expenses. The other half isn't deductible for self-employment purposes, because it was used for personal purposes.
TurboTax Tip: Be sure to report all of your income, regardless of the source, even if you don't receive a 1099.
7. You deliver the goods
Companies like TaskRabbit, Postmates, and GrubHub match people who need to have an odd job or chore completed with someone who wants to make some extra money. If you deliver a service, mail, or food via services like these, you may have to pay taxes on your earnings.
8. Rent your room
Renting out your home or space in your house, such as through Airbnb, can be taxable if you did it for more than two weeks during the year. If so, you can deduct expenses such as:
- maintenance, housekeeping, and home repairs
- utilities
- mortgage interest
9. Earned valuable goods
Say your friend signed over the title to an old car that was sitting in his driveway or gave you a bike worth a couple of hundred dollars in exchange for some work you did. Helping a neighbor clean out a garage or helping a friend move to a new house might have earned you a handsome reward other than cash, but a valuable good is still considered income.
10. Kickstart with crowdfunding
If you received money through Kickstarter.com, Fundly, Indiegogo, or any of the other relatively new crowdfunding companies, this is considered income, and you might have to pay taxes.
IRS documentation
When you are self-employed you aren't likely to receive a W-2 from an employer like you would if you were an employee. Instead, you might receive some other forms including 1099-NEC, 1099-MISC, and 1099-K. These are used by businesses to document payments made to people and businesses that are issued payments.
Companies use Form 1099-NEC to report nonemployee compensation while Form 1099-MISC is used to report other payments such as prizes, rents and royalties.
Companies such as Venmo and PayPal use Form 1099-K to report payments they make to you from processing payment transactions (think debit and credit cards) as well as third-party payments. You should receive this from a third-party payment processor if they processed more than $600 in payments for you during the year. There's no threshold for payment card transactions.
The IRS is gradually phasing in new 1099-K reporting requirements for payments from third-party processors like Venmo and Paypal. In 2021, Congress changed the reporting threshold from over $20,000 in payments and more than 200 transactions to over $600 in payments regardless of the number of transactions. But instead of using the new $600 threshold right away, the IRS applied the previous reporting threshold for the 2022 and 2023 tax years. For the 2024 tax year, the IRS is using a $5,000 threshold, regardless of the number of transactions. The threshold will drop to $2,500, regardless of the number of transactions, for the 2025 tax year. Starting in 2026, the $600 threshold will apply.
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