At what point is it necessary to declare for tax purposes money received for a task?

Question

For example, if I move and pay my friends $100 each to help me load the moving van, obviously no one is going to declare that as taxable income. The high-school kid who mows my lawn every couple of weeks surely does not declare what I pay him.

So when does declaration of income become necessary?

Answer 1

Declaration becomes necessary the moment you place the C-note into their hands.

Taxes are "cash basis", so the money becomes taxable upon receipt. And yes, it is, in fact, income. They worked, they earned money, they got paid. (Money from mowing lawns is also taxable. In this case, parents are the ones who need to claim it.)

You are not responsible to pay payroll taxes, such as FICA, FUTA or SUTA, because there's a 3-day rule. Non-taxed cash payments are allowed for temporary help if they are employed for 3 days or less. (My wife tells me that there's a $600 rule here, too. 3 days or less or $600 or less, but again, this refers ONLY to payroll taxes.)

The only relavent tax is the income tax, and Congress has declared that all moneys received qualify as income until they say otherwise in an "exclusion". This isn't one of them.

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Some of the answers above offer thresholds, below which they say income is not reportable. This is not true. Every $25 you earn puts you in a higher tax "box" in the tax tables, and so the IRS wants all of it reported.

The rules they're thinking of usually refer to businesses. In my state you don't need to license as a business until you make more than $400, but you still have to report the income! Under that amount is considered hobby income, miscellaneous income, capital gains or something else, depending on what you've done.

(By the way, you are allowed to consider this part of your moving expenes. You would have to go through the rules for claiming moving expenses to see if you qualify.)

Answer 2

The point at which it is necessary for a person to declare self-employment income on a tax return is when a person has $400 or more net income from self-employment. The tax return is required because Social Security and Medicare taxes are owed even though no income tax may be owed.

Receiving cash in exchange for services is self-employment, so the rules apply to both your examples.

Answer 3

Theoretically, even $1 must be reported if your total income is enough that you are required to file.

Anything less than $0.50 can be unreported if you follow the rule that allows for rounding to the nearest $1, but only if you follow this rule for all amounts (meaning that you also round up when it is in the IRS's favor).

In both your examples, reporting is required.

As a practical matter, enforcement is not likely in either of those cases.

Answer 4

For federal, if a person earns over $399 in a year from self-employment, they are legally required to report it and pay taxes on it. Legally the kid mowing your lawn should be paying tax on it, especially if yours isn't the only lawn he's mowing.

Answer 5

New tax withholding tables are the government letting you keep extra money. Nowhere above do they point out the IRS reducing tests. the authentic concern is they screwed up the tables, think of that, and many unfavorable and middle type persons are going to ought to pay returned money they have already spent which will consequence our ability to financially get well.

Answer 6

When you pay your friends $100 each, this is their self-employment income. For high-school kids also this is self-employment income. For self-employment income, they can deduct their business related expenses.
IRS want us to file our return, if the self-employment income is $400 or more.
Also every income (by your friends $100 each and by high-school kids) is reportable if they they meet filing requirement.

Answer 7

ethically you should report any income, and also declare the expenses used to earn that income.
The government requires an employer to issue a 1009, statement of earnings if you pay someone more that $600 in one year.

Answer 8

I think, anything over $600 is declarable as taxable income. Check the website IRS.gov for information.

Answer 9

I don't know where you are, but in Louisiana if a person makes more than $360 a month, it must be reported.

Answer 10

I believe that in the UK you can earn about £4500 a year before you need to pay tax.