Reimbursement vs fees and taxes

Going over this issue of what you can write off. My taxable income is under $6000 a year, mostly from mystery shopping. If it wasn't for having to pay both sides of Social Security and the Medicare tax I wouldn't have to file taxes. In my case does the reimbursement vs fees even matter, if I don't even make enough to get taxed on?

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Well, well, well. It's a deep subject. Why would you want to pay both sides of SS and medicare on $6,000 if you're only REQUIRED to pay it on, say, $3500 (just using that for illustration).
As an Independent Contractor, any money over $600 is reportable as income. But I don't make enough to get taxed on it. I guess the issue of reporting fees as an income wouldn't matter. We also pay both sides of the Social Security and Medicare taxes. There does not seem to be a way around that.
john,
Whether it matters for SE tax is an easy question. Just look up the IRS for used to compute SE tax, insert your numbers and see what you get. Just remember not to include reimbursements since they are not taxable and need to be netted out before getting the total for net income on your Schedule C. If you are not using Schedule C, you are using the wrong form to report your MS income. That schedule tells you what you should deduct.

Based in MD, near DC
Shopping from the Carolinas to New York
Have video cam; will travel

Poor customer service? Don't get mad; get video.


Edited 1 time(s). Last edit at 08/06/2018 02:05PM by walesmaven.
I will do that next time I file. I do use schedule C. I just have to be more careful on weeding out the reimbursements from the fees. Some shops separate them, some don't. Especially on the shops that don't give you a 1099. I'll update my spread sheet to note not to include reimbursements.
ANY money made is reportable, regardless of the amount. If you did a single $3 phone shop for Company A last year, that $3 is taxable. Keep good records.

Seriously, nobody cares that you're offended.
@iShop123 wrote:

ANY money made is reportable, regardless of the amount. If you did a single $3 phone shop for Company A last year, that $3 is taxable. Keep good records.

It may be reportable, but if you make less then $12,000 you don't pay any taxes. The individual deduction is now about $12,000.
But you do pay SE taxes.

Based in MD, near DC
Shopping from the Carolinas to New York
Have video cam; will travel

Poor customer service? Don't get mad; get video.
@walesmaven wrote:

But you do pay SE taxes.

I know. There's no way around the Social Security and Medicare Tax.
When you get to be the age for Medicare, you will be glad.

Based in MD, near DC
Shopping from the Carolinas to New York
Have video cam; will travel

Poor customer service? Don't get mad; get video.
@walesmaven wrote:

When you get to be the age for Medicare, you will be glad.

I'll be on Medicare this year. I'm already on Social Security.
@mystery2me wrote:

Separating reibursements vs. fees on your spreadsheet is an excellent idea.

for me it may be a moot point, since I only make about $5000 a year in taxable income. With the standard deduction at $12,000, I don't pay any taxes anyway. Write offs are only good if you make more than $12,000 a year as a single person.
@ceasesmith wrote:

Again, why pay social security and medicare taxes on money you don't have to?
Because Social Security and Medicare taxes are taken out before anything else. You cannot deduct anything that could lower those taxes. It's 15.3 % off the top from your gross.
john,
It really is take from your NET SE income. And not even from all of your net if I recall correctly!

Based in MD, near DC
Shopping from the Carolinas to New York
Have video cam; will travel

Poor customer service? Don't get mad; get video.
Why do I feel like I'm beating my head against a brick wall?

Why pay social security/medicare on gross when you are allowed to pay it on net?
@ceasesmith wrote:

Why do I feel like I'm beating my head against a brick wall?

Why pay social security/medicare on gross when you are allowed to pay it on net?

Like many in society today, you keep repeating yourself with no facts to back it up. Just you because you say something, doesn't make it true. Post your facts to prove it.


As a self-employed individual, you must pay Social Security and Medicare taxes. However, since your 1099-MISC income is not subject to self-employment tax withholding, you are required to calculate and pay these taxes yourself.

Edited 1 time(s). Last edit at 08/07/2018 02:43PM by johnb974.
John, if you "take in" $20,000 (your gross), but after expenses the number is, say, $14,000 (your net), you pay taxes on $14,000, which is what your Schedule C will report as your taxable income. Not $20,000.

I learn something new every day, but not everyday!
I've learned to never trust spell-check or my phone's auto-fill feature.
@BirdyC wrote:

John, if you "take in" $20,000 (your gross), but after expenses the number is, say, $14,000 (your net), you pay taxes on $14,000, which is what your Schedule C will report as your taxable income. Not $20,000.


Unlike Federal taxes, where you don't pay any, if your income is below $12,000, you always have to pay Social Security and Medicare taxes. There is no way to reduce those taxes. That's a good chunk off of my income.
@johnb974 wrote:


Unlike Federal taxes, where you don't pay any, if your income is below $12,000, you always have to pay Social Security and Medicare taxes. There is no way to reduce those taxes. That's a good chunk off of my income.

Nobody's arguing that point. But we're saying that you don't pay those on your gross income; you pay them on your net. If you show a net loss, you don't pay them.

I learn something new every day, but not everyday!
I've learned to never trust spell-check or my phone's auto-fill feature.
@johnb974 wrote:

As an Independent Contractor, any money over $600 is reportable as income. But I don't make enough to get taxed on it. I guess the issue of reporting fees as an income wouldn't matter. We also pay both sides of the Social Security and Medicare taxes. There does not seem to be a way around that.


Here is one of my first post. My point from the beginning was we pay Social Security and Medicare taxes. There's no way around that. It doesn't matter if it's gross or net, you cannot cut or eliminate them.
Here's the fact, John:

Schedule SE, form 1040 (self employment tax form)

Section A, Line 2

NET PROFIT (or loss) FROM SCHEDULE C

If you use Schedule C, as you posted you do, you place the amount from line 31 right here. Note the IRS says "NET INCOME".

If you are putting your gross on this line -- well, just go ahead and keep doing it YOUR way. I'm sure the government is thrilled with your overpayment.

Everyone agrees that yes, we pay the social security/medicare taxes on our income. But as self employed persons, we only have to pay it on the NET, not the gross.
@johnb974 wrote:

@ceasesmith wrote:

Again, why pay social security and medicare taxes on money you don't have to?
Because Social Security and Medicare taxes are taken out before anything else. You cannot deduct anything that could lower those taxes. It's 15.3 % off the top from your gross.

You're just WRONG.
Of course you can't, unless you make no profit at all....

As someone else pointed out later, though, any and all self-employment income is reportable for tax purposes. Where the $600 comes in is that that's what triggers a 1099 from a client.

I learn something new every day, but not everyday!
I've learned to never trust spell-check or my phone's auto-fill feature.
John says: "Here is one of my first post. My point from the beginning was we pay Social Security and Medicare taxes. There's no way around that. It doesn't matter if it's gross or net, you cannot cut or eliminate them."

Why would it not matter if it's on gross or net? If your gross is $20,000, and net is $14,000, it's several hundred dollars less in taxes you'd have to pay.

We all agree: yes, we pay both sides of Medicare/Social Security. But it's on NET, not GROSS.
@BirdyC wrote:

Of course you can't, unless you make no profit at all....

As someone else pointed out later, though, any and all self-employment income is reportable for tax purposes. Where the $600 comes in is that that's what triggers a 1099 from a client.

It is reportable, but it doesn't mean you pay taxes on it. With the $12,000 of the Standard Deduction for individuals, you won't pay any Federal income taxes. For Social Security and Medicare taxes, the Standard Deduction does not apply.
As a self-employed individual, you must pay Social Security and Medicare taxes. However, since your 1099-MISC income is not subject to self-employment tax withholding, you are required to calculate and pay these taxes yourself. These taxes appear on a Schedule SE, which must be attached to your tax return. If your only reportable income is from a 1099-MISC, than you are taxed on the gross.
@johnb974 wrote:

It is reportable, but it doesn't mean you pay taxes on it. With the $12,000 of the Standard Deduction for individuals, you won't pay any Federal income taxes. For Social Security and Medicare taxes, the Standard Deduction does not apply.

I never said you had to pay taxes on it; all I said was that it was reportable income. I think you're "arguing" when it's not necessary. Are you being contrary on purpose? winking smiley

I learn something new every day, but not everyday!
I've learned to never trust spell-check or my phone's auto-fill feature.
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