Question

Threshold for reporting app earnings ?

Forum|Forum|2 years ago
February 11, 2024
2 replies
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Last year I published a paid app, from which the gross sales were less than $200 in all of 2023, of which I received less than $150 after Apple's cut. For such a small amount, I think Apple doesn't even send out a 1099.

Do I need to report this amount in my 2023 tax filing ? If so, how ?

PatriciaV

Yes, the IRS expects you to report ALL income from all sources. Since this was an attempt to earn money, you are considered to be self-employed and will need to include Schedule C on your return.

Fortunately, you can also claim any expenses you incurred in producing and selling your product.

Additional Information:

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A

ahmadka2Author

Thanks for the reply, but I had some follow-up questions:

1) I have a full-time job which comes with a conventional W-2 every year, which I will report on my tax return. However the small amount of money (less than $150) I made from app sales that I'm discussing here is definitely not what I would consider as my primary source of income. Rather, I would treat it as money made from a hobby. So given this info, would I still need to declare it on my tax return ?

2) Also, I read online that online self-employment related sales have to be reported under 1099-K. Even though I haven't received a 1099-K from Apple (I assume because I'm way below the threshold beyond which they're required to send out a 1099-K), don't I need to report this income under 1099-K instead of Schedule C ?

3) Lastly, as I mentioned above, the sales generates less than $200, but the money I actually received in the bank after Apple took their cut is less than $150. So which amount here do I need to declare ?

J

JamesG1

(1) If the activity is considered hobby income, the gross proceeds of $200 is taxable and reportable but no self-employment tax is due. In addition, no expenses are allowed to be reported against the hobby income. See here.

In TurboTax Online, post hobby income as follows:

Down the left side of the screen, click Federal.
Down the left side of the screen, click Wages & Income.
Scroll down to Less Common Income and click on the dropdown menu.
To the right of Miscellaneous Income, 1099-A, 1099-C, click the Start / Revisit button.
To the right of Other reportable income, click the Start / Revisit button.
At the screen Any Other Taxable Income, click Yes.
At the screen Other Taxable Income, enter a description and the amount.
Click Continue.

The entry will be reported:

on line 8z of Schedule 1 of the Federal 1040 tax return, and
on line 8 of the Federal 1040 tax return.

(2) IRS form 1099-K is a reporting form and the information is transferred to forms within the Federal income tax return. Think of a W-2 which reports income but the income information is transferred to other forms within the tax return. The $200 gross proceeds is below the 2023 IRS form 1099-K reporting requirements but the income is taxable and reportable.

If you are a U.S. citizen or resident alien, the IRS states that you are subject to tax on worldwide income from all sources and must report all taxable income and pay taxes.

(3) If you report self-employment income, you report $200 gross income and $50 expenses equals $150 taxable income and income subject to self-employment tax.

If you report hobby income, you report $200 taxable income.

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V

Vanessa A

The fact that you plan to continue to sell the app and earn money doing so, would likely put you into the self-employment category more than the hobby as this is done with an intent to earn money, not just as something you do for pleasure and happen to make money doing or are just making enough to support your hobby.

Whatever number Apple is giving you is the number you will use as a starting point. So, if they are telling you the sales were $182 (it seems there should be some place to find a solid number) then you would report the $182 as your income. Then the $55 would be deductible as a business expense if you are going to file as self-employed. If you are choosing to list it as a hobby, then you would still report the $182 and then you could claim it as an itemized expense if you are itemizing your return instead of taking the standard deduction.

Standard versus Itemized Deduction

Hobby versus Business Income

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