This is a question that I get often from Fiverrs so I want to clear it up here. What forms you have to prepare depend on many factors including your taxing jurisdiction, the amount of income you made, and the type of business entity your business is. Let me explain more below.
- In the US, the majority of people have to pay Federal Income tax. This is a tax levied by the US Federal Government and pretty much everyone has to pay for that. From there you have to figure out if you have a State or even Local Income Tax. Some states, like Texas, do not have an income tax so most Texas residents only have to pay a Federal tax. Other states like Georgia, have a State Income tax which means that residents of that state have to also prepare (and pay) taxes to the state of Georgia. There are even some cities that charge a City Income Tax and residents of those cities have to prepare and pay taxes to the city too!
- For US Federal Purposes, for 2013 you only had to prepare a tax return if your income was above $800. If your income was less than $800 you are not required to do a tax form, however, it may still be beneficial for you to do so since you may qualify for some credits which may end up creating a tax refund for you to receive. Keep in mind that the $800 amount is for ALL your income. If you made $60 on Fiverr and another $770 doing some other job, you are required to do a tax return.
- The type of business you run is also a factor into what type of forms you have to fill out. If you are a sole propriertoship, you can usually get away with just using Schedule C on your tax return. If you’re a corporation or a partnership, then forms 1120 or 1065 are what you’ll have to focus on. Again, this is only for the Federal portion. Other forms may apply to you depending on where you live and/or where you do most of your business.
This is general advise and guidelines that do not take into account your specific tax situation. You should consult with a trusted tax professional prior to making any decisions that may impact your taxable situation. Contact me for any clarification.