Unemployed TaxFilter

July 24, 2010 8:06 AM

Hi, I am Mrs. (or Mr.) Long-Term-Unemployed, in the US since January, conveniently for tax purposes. My last job wasn't covered by unemployment insurance so I have been living off my very meager savings. This is starting to run out and I have been taking odd-jobs for cash, literally. If this keeps on until the end of the year how should I do my taxes?

These really are odd-jobs, small amounts for random people. My total income for the year would likely be under $10K plus I have a child as a dependent. Because of an odd set of circumstances (I own my home outright (no morgage) and get a generous foodstamps SNAP allotment) I am living very cheaply.

Should I just report all of these little jobs as non-W2 income? How would I best do this? Is my situation going to set off IRS redflags because of the extremely low income?

posted by anonymous to work & money (3 answers total)

Check your last year's return. Did you file as Head of Household? If you're eligible to file as HoH, which seems likely given how you describe your situation, and you make less than $10k/year, you don't actually have to file at all. (The actual limit is $12k, I think? It's more than $10k, anyway. I'm being lazy and not looking it up, sorry.)

However, and here's the big however, if you've actually been working, then you would very likely qualify for EIC with an income this low and a qualifying child. So keeping track of these amounts to file might very well result in the government giving you money at the end of it, not the other way around. So keep track as best you can of the amounts you take in. At the end, the best idea is to figure out your taxes, and if you wouldn't get anything back, you can ignore it, but if you would get money back from refundable credits? File away.
posted by gracedissolved at 8:19 AM on July 24, 2010

Assuming that by set off IRS redflags you mean, "trigger an audit," I don't think you have much to worry about. Small incomes do not trigger audits.

I am not an accountant, buy I have run a very small business and dealt with the taxes (with the assistance of my kind aunt who is a CPA).

To do this legally, I believe you'll need to fill out a schedule C (profit or loss from business; the simplified schedule c-ez is probably fine) and also a schedule SE (self-employment tax). I'm pretty sure you'll owe 15.3% of your earnings as self-employment tax. That tax burden may be offset by things like EIC, but I really don't know how that works at all.
posted by jon1270 at 8:34 AM on July 24, 2010

"Small incomes do not trigger audits."

They do when they're around the optimal amount for getting the largest possible earned income credit, which is a refundable credit and thus could give the OP additional income.

OP: Keep very very good records of everything -- income, and any expenses related to generating that incomes (e.g. mileage traveled for jobs, etc.). I agree that you'll probably have to file a Schedule C and SE, but keeping track of your expenses will reduce the amount of self-employment tax you pay. At your income level, with a child, you will indeed probably qualify for EIC. Also keep track of any child care expenses you pay for child care while you're working or seeking work, since you can get a credit for that as well, but you'll need the employment identification number or social security number of whoever provides the child care.
posted by Jacqueline at 6:22 PM on July 24, 2010