A freelancer must file a tax return and generally pay self-employment taxes if their net earnings are $400 or more. Even if it is a side job or part-time, net earnings below $400 may not trigger the self-employment tax (social security/medicare), but you may still have to file based on other income.
If you've earned more than $400 in net self-employment income — even if it's just from a side hustle — you must file taxes. With most freelance income, you report it on Form 1040 Schedule C, as part of your personal tax return.
The IRS $600 rule refers to a change in reporting requirements for third-party payment apps (like Venmo, PayPal) for taxable income from goods and services, where platforms must send a Form 1099-K if you receive over $600 in a year, intended to capture gig economy/side hustle income, though delays and phased implementation have adjusted the timeline, with current rules for 2024 using a higher threshold ($5,000) before fully phasing to $600 for future years, but remember all taxable income, regardless of form, must always be reported.
Yes, if you have net earnings of $400 or more from self-employment, you must file a federal tax return to pay self-employment tax (Social Security and Medicare), even if your total income is less than $5,000. You'd file a return (Form 1040) to report this income and pay the tax via Schedule SE and likely estimated quarterly taxes, but you still need to file if your other income (like W-2 wages) meets other standard IRS filing thresholds (e.g., $14,600 for single filers in 2025).
Once you cross that £1,000 threshold, you need to register as self-employed with HMRC and file a Self Assessment tax return.
The IRS may charge penalties and interest beginning from the date they think you owe the tax. There are times when leaving a 1099 off of your tax return doesn't change it. And sometimes including a missing 1099 can actually reduce the tax that you owe.
Getting Form 1099-K from eBay
If your sales hit the payment threshold, eBay must prepare and send 1099-K copies to the IRS and to you by January 31 of the following year. IRS 1099-K payment reporting thresholds by year: $5,000 in 2024. $2,500 in 2025.
You must file a tax return if you have net earnings from self-employment of $400 or more from gig work, even if it's a side job, part-time or temporary.
Here are a few mistakes small business owners should avoid:
A 1099 significantly affects taxes because you're considered self-employed, meaning you pay both income tax and the full self-employment tax (15.3% for Social Security & Medicare), as there's no employer to split it with. This usually means setting aside 25-35% of your income, and you'll likely need to make quarterly estimated tax payments to avoid penalties, though business expense deductions can lower your taxable amount.
For the 2025 tax year, you'll generally receive a Form 1099-K from platforms like eBay, Etsy, and payment apps if you have over $20,000 in gross payments AND more than 200 transactions, but you must report all income (even small amounts) if it's for goods/services, as you're taxed on profit, not just when you get a 1099-K, with lower state thresholds possible.
Unlike when you're employed by a single employer, as a freelancer you'll be responsible for your own tax filing, and for paying your bill at the end of the year. That can get complex - particularly if you're location independent and work from more than one place during the course of a tax year.
under age 65. Single filing status. don't have any special circumstances that require you to file (like self-employment income) earn less than $15,750 (which is the 2025 Standard Deduction for a taxpayer filing as Single)
By claiming the tax free threshold, you don't pay tax on the first $18,200 you earn during the financial year.
Key takeaways
You may be able to reduce your taxable income by maximizing contributions to retirement plans and health savings accounts. Tax-loss harvesting, asset location, and charitable giving are other tax strategies to consider to potentially lower your tax bill.
The biggest tax mistakes people make include filing late, math errors, incorrect personal info (like Social Security numbers), forgetting deductions/credits (like EITC), misreporting income, not signing forms, and making errors with bank details for direct deposit, all leading to delays, penalties, or missed savings, with using tax software or professionals helping avoid these common pitfalls.
The IRS doesn't have a specific dollar limit for hobby income; instead, it focuses on profit motive: if you intend to make a profit, it's a business, but if it's for fun, it's a hobby, and you must report all income but can't deduct losses. Key is that you report all hobby income on Form 1040 as "other income," and if net earnings from self-employment are $400 or more, you owe self-employment tax, even if it's a side gig. The main difference from business is that you can't deduct hobby expenses (under current law) and must report all profits.
If you sell over $600 on eBay, you must report the profit as taxable income, even if you don't receive a Form 1099-K (which currently requires $20k/200 transactions federally for 2025+), because some states have lower thresholds, and you're responsible for taxes on profits. You'll likely get a 1099-K in certain states (like MA, VT) at $600, which reports gross sales to the IRS and you file on Schedule C, deducting expenses like fees, shipping, and inventory costs to find your taxable profit.
If you list more than 250 items per month, you'll start paying a $0.35 insertion fee per listing. Category exclusions apply.