Further explanation of $400 income tax rule for US-based freelancers
Thread poster: Matthias Hirsh

Matthias Hirsh  Identity Verified
United States
Local time: 23:35
Member (2018)
Japanese to English
Jan 30, 2019

I am sure other US-based freelancers are aware of the frequently reported rule that if you make less than $400 in a year freelancing, it is not subject to income tax. However, does that mean that if you do make more than $400, that the total taxable amount is less $400? Such as, if a person makes $1000 freelancing, only $600 is income-taxable?

 

The Misha
Local time: 23:35
Russian to English
+ ...
You are probably confusing this with the cutoff amount of $600 Jan 30, 2019

Anything below that need not be reported by the payer on a 1099. However, there is no such thing as "nontaxable" income in the US. 1099 or not, you are still supposed to report all income on your income tax return, and it gets added up to your overall income from other sources. What happens then totally depends on a gazillion other factors, such as the number of dependents and deductions you can claim. No two returns are alike. Everyone is special:)

 

Thayenga  Identity Verified
Germany
Local time: 05:35
Member (2009)
English to German
+ ...
Minimum income Jan 30, 2019

Only an income less than $ 400 is not subject to taxes. If you make $1000, then the entire $ 1000 are taxable. Of course minus business expenses.

MollyRose
Yolanda Broad
 

Matthias Hirsh  Identity Verified
United States
Local time: 23:35
Member (2018)
Japanese to English
TOPIC STARTER
Thanks Jan 30, 2019

Thanks for clearing it up. A family member with more tax-filing experience, albeit non-freelance, suggested it was the opposite.

 

Samuel Murray  Identity Verified
Netherlands
Local time: 05:35
Member (2006)
English to Afrikaans
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SITE LOCALIZER
@Meghan Jan 30, 2019

Meghan Hirsh wrote:
I am sure other US-based freelancers are aware of the frequently reported rule that if you make less than $400 in a year freelancing, it is not subject to income tax.


My understanding (but I'm no expert, and please correct me if I'm wrong) is that the $400 rule relates to whether or not you are required to submit income tax returns. In other words, if there is no other reason that requires you to submit income tax returns, and you earn more than $400 per year doing freelance work, then you must submit an income tax return. Likewise, if you earn less than $400 per year doing freelance work, but there is some other reason why you are required to submit an income tax return, then, obviously, you must submit an income tax return.

As I understand it, this $400 cut-off has nothing to do with how much tax you pay. If your taxable income (i.e. total income minus deductions and exemptions) is higher than $0, then you pay tax on your entire taxable income.

Thayenga wrote:
Only an income less than $400 is not subject to taxes.


Really? Do you have a URL for that?


 

Matthias Hirsh  Identity Verified
United States
Local time: 23:35
Member (2018)
Japanese to English
TOPIC STARTER
Actually have heard of it Jan 30, 2019

The Misha wrote:

Anything below that need not be reported by the payer on a 1099. However, there is no such thing as "nontaxable" income in the US. 1099 or not, you are still supposed to report all income on your income tax return, and it gets added up to your overall income from other sources. What happens then totally depends on a gazillion other factors, such as the number of dependents and deductions you can claim. No two returns are alike. Everyone is special:)


No, I’m aware of the $600 1099 thing. I actually just sent a notice to an agency I formerly worked with in the hopes that they’ll actually send me one.


 

Matthias Hirsh  Identity Verified
United States
Local time: 23:35
Member (2018)
Japanese to English
TOPIC STARTER
Google Jan 30, 2019

Samuel Murray wrote:

Meghan Hirsh wrote:
I am sure other US-based freelancers are aware of the frequently reported rule that if you make less than $400 in a year freelancing, it is not subject to income tax.


My understanding (but I'm no expert, and please correct me if I'm wrong) is that the $400 rule relates to whether or not you are required to submit income tax returns. In other words, if there is no other reason that requires you to submit income tax returns, and you earn more than $400 per year doing freelance work, then you must submit an income tax return. Likewise, if you earn less than $400 per year doing freelance work, but there is some other reason why you are required to submit an income tax return, then, obviously, you must submit an income tax return.

As I understand it, this $400 cut-off has nothing to do with how much tax you pay. If your taxable income (i.e. total income minus deductions and exemptions) is higher than $0, then you pay tax on your entire taxable income.

Thayenga wrote:
Only an income less than $400 is not subject to taxes.


Really? Do you have a URL for that?


A simple Google search “freelance income $400” or the like will bring up dozens of results from freelancing blogs and whatnot.


 


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Further explanation of $400 income tax rule for US-based freelancers

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