Side income brings one question before all the others: at what point does it have to go on a tax return? The number people repeat to each other is $600, which is a reporting threshold that applies to the payer, not to you. The number that decides whether you file is $400, and it is about your net earnings from self-employment.
This piece sticks to what the IRS publishes on its own pages — the Self-Employed Individuals Tax Center, its estimated taxes page, and its Form 1099-K pages — and quotes the wording rather than paraphrasing it, because the paraphrases circulating online are what cause the confusion. It is general information and not tax advice.
The $400 rule, and what net means
The IRS's sentence is short: 'You have to file an income tax return if your net earnings from self-employment were $400 or more.'
Two words in it do a lot of work. Net means after the expenses of the business, so a year in which you sold $900 of work and spent $600 on the tools to do it is a different year from one in which you sold $900 and spent nothing. And self-employment has its own definition — the page says you are generally self-employed if you are a sole proprietor, an independent contractor, a member of a partnership that carries on a trade or business, or otherwise in business for yourself.
The floor is not a general exemption either. The same page notes that below $400 you may still have to file if you meet another requirement in the Form 1040 instructions, which commonly catches people who also have wage income or other filing triggers.
Sell from a free OneSol page through your own Stripe or PayPal account, so every sale lands in one account you can match against your records. Payments come with Pro.Start free →A missing 1099 changes nothing
The commonest wrong assumption is that income the platform did not report is income you do not report. The IRS's wording on its Form 1099-K pages is: 'Whether or not you receive a Form 1099-K, you must still report any income on your tax return.' It specifies that this includes payments for goods you sell, including personal items sold at a gain, and services you provide.
Treat a 1099 as a copy of something a payer already sent the IRS. It is a useful cross-check on your own figures and nothing more. If your records and the form disagree, the fix is in how you report, not in which number you ignore.
The three forms the IRS points to
Once you are filing as self-employed, the IRS names the pieces:
- Schedule C (Form 1040), which it describes as being 'to report any income or loss from a business you operated or profession you practiced as a sole proprietor'.
- Schedule SE (Form 1040 or 1040-SR): 'In order to report your Social Security and Medicare taxes, you must file' it. This is the self-employment tax, and it is the part people are most often surprised by.
- Form 1040-ES, Estimated Tax for Individuals, used to figure estimated taxes including Social Security, Medicare and income taxes. The IRS says it includes blank vouchers for mailing payments, and lists other payment options at IRS.gov/payments.
The IRS also summarises the shape of the year for a self-employed person: generally you are required to file an annual income tax return and pay estimated taxes quarterly. Whether the second half applies to you is the next question.
The $1,000 test for quarterly payments
The IRS's estimated taxes page sets the trigger by what you expect to owe, not by what you earn: individuals, including sole proprietors, partners and S corporation shareholders, 'generally have to make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed'. Corporations have a lower threshold of $500 or more.
It describes the timing as four payment periods in the year, each with a specific payment due date, and links to a separate guide for those dates instead of listing them. That is a good reason to read the dates off Form 1040-ES or the IRS page for the year you are in; they move with weekends and holidays, and a date copied from an old article is how people miss one.
Avoiding the underpayment penalty
The page does not promise there is no penalty; it describes who avoids it. Most taxpayers will avoid it if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year, whichever amount is smaller.
The prior-year route is the useful one for a side income that is growing: paying through the year against last year's known figure is a fixed target, where 90% of a year that has not finished yet is a guess.
And if the income is uneven, the IRS says you may be able to avoid or lower the penalty by annualizing your income and making unequal payments, pointing to Form 2210 to work out whether a penalty applies. A single big project in the autumn does not have to be spread as if it had arrived in four equal pieces.
Withholding from a day job as a lever
If you also have an employer, there is a second way to cover a side income without quarterly vouchers: raise the withholding on the wage job so the total paid in over the year clears one of the safe-harbour tests above. The IRS's own framing of the penalty is in terms of withholdings and credits as well as estimated payments, so the two are interchangeable for that purpose.
Which is easier depends on how predictable the side income is. Lumpy, seasonal income usually suits annualised estimated payments; a steady monthly trickle is often simpler to absorb through withholding.
Records that make the filing short
All of the above rests on knowing your net. That means two running lists: what came in, and what you spent to earn it. Platform fees, refunds, software, equipment and the processing cut are the ones most often forgotten, and they are exactly the items that turn a gross figure into the net the $400 rule is measured against.
If you sell from a OneSol page, the money runs through your own Stripe, PayPal, Razorpay or Square account rather than ours, so the fees and payouts are already in an account in your name, and your orders sit in your dashboard to download as a CSV at the end of the year. Payments come with Pro.
This is general information drawn from publicly published IRS guidance, not tax advice, and state rules sit on top of the federal ones described here. If your side income is substantial, or you are unsure which tests you meet, speak to a tax professional.