Help! Urgent questions about taxes on online income.

Hello there.

I am looking for some guidance regarding tax obligations for income earned online. I have spent the last few days digging into this topic, scrolling through various threads on this forum, but it seems that even since 2017, a great deal has changed.

For the past 15 months—ever since I turned 18—I have been earning money through the internet. Specifically, I provide services in video games, essentially boosting players' ranks. My payments come directly via PayPal from clients located abroad; it isn't tied to any one specific country. Since I started, I have been averaging about $1667 per month. To be perfectly honest, when I first began, I never anticipated the income would be this significant, nor did I expect it to persist for this long.

It was only relatively recently that the realization dawned on me that I might actually be liable for taxes on these earnings. Based on my research over the last couple of days, it appears that I most certainly am.

From what I can gather, I will likely be facing interest charges and perhaps even penalties because of my delay in reporting this.

To summarize the situation:
• I am a full-time student.
• I have been earning money online through gaming since April 2018.
• This is my sole source of income.
• I earn an average of approximately $1667 per month.
• Payments arrive via PayPal, which I then transfer to my local bank account.

I logged into my IRS account to check for any outstanding debts, and the system indicated that I owe nothing. However, I assume this is simply because I haven't reported any income yet. Apparently, I am required to declare these earnings, but when I accessed the filing forms on the IRS website, I found myself staring at an overwhelming number of fields and technical jargon that I have never encountered before. Quite frankly, I am at a total loss as to how to proceed.

My questions are as follows:
• Am I legally required to pay taxes on this? (Yes, you are.)
• If I am, what is the most straightforward way to handle this?
• How can I calculate exactly what I owe, including the back taxes and interest?
• Will I also be responsible for Social Security, Medicare, or other specific payroll/sales taxes?

I feel genuinely lost and, admittedly, a bit anxious. The entire process is incredibly convoluted; it feels nearly impossible for someone with zero background in taxation or accounting to navigate this without assistance.

Chloe Lee31 said:Hello there.

I am looking for some guidance regarding tax obligations for income earned online. I have spent the last few days digging into this topic, scrolling through various threads on this forum, but it seems that even since 2017, a great deal has changed.

For the past 15 months—ever since I turned 18—I have been earning money through the internet. Specifically, I provide services in video games, essentially boosting players' ranks. My payments come directly via PayPal from clients located abroad; it isn't tied to any one specific country. Since I started, I have been averaging about $1667 per month. To be perfectly honest, when I first began, I never anticipated the income would be this significant, nor did I expect it to persist for this long.

It was only relatively recently that the realization dawned on me that I might actually be liable for taxes on these earnings. Based on my research over the last couple of days, it appears that I most certainly am.

From what I can gather, I will likely be facing interest charges and perhaps even penalties because of my delay in reporting this.

To summarize the situation:
• I am a full-time student.
• I have been earning money online through gaming since April 2018.
• This is my sole source of income.
• I earn an average of approximately $1667 per month.
• Payments arrive via PayPal, which I then transfer to my local bank account.

I logged into my IRS account to check for any outstanding debts, and the system indicated that I owe nothing. However, I assume this is simply because I haven't reported any income yet. Apparently, I am required to declare these earnings, but when I accessed the filing forms on the IRS website, I found myself staring at an overwhelming number of fields and technical jargon that I have never encountered before. Quite frankly, I am at a total loss as to how to proceed.

My questions are as follows:
• Am I legally required to pay taxes on this? (Yes, you are.)
• If I am, what is the most straightforward way to handle this?
• How can I calculate exactly what I owe, including the back taxes and interest?
• Will I also be responsible for Social Security, Medicare, or other specific payroll/sales taxes?

I feel genuinely lost and, admittedly, a bit anxious. The entire process is incredibly convoluted; it feels nearly impossible for someone with zero background in taxation or accounting to navigate this without assistance.

Well..

Quavo:

It only recently dawned on me that I might actually be liable for taxes on this, and based on all the threads I've been reading during my research over the last few days, it looks like I definitely am.

You certainly should.

Quavo:

From what I can gather, I'll probably have to deal with interest charges and maybe even some penalties since I'm behind on my filings.

Just more work on your plate. Let's not overcomplicate things; you'll likely find a way to navigate this without any major issues.

Quavo:

Here is the breakdown of my situation: • I am a full-time student • I've been earning money online through gaming since April 2018 • This is my only source of income • I make an average of roughly $1667 per month • Funds go to PayPal, then I transfer them to my bank account

That all sounds fine.

Quavo:

My questions are: • Do I need to pay taxes? (yes, you do) • If so, what is the simplest way to handle this? • How can I calculate exactly how much I owe (taxes plus interest)? • Am I responsible for Social Security, Medicare, or sales tax, etc.? I'm feeling quite lost and a little anxious. It's incredibly overwhelming, and I don't see how someone with zero knowledge of the IRS or accounting is supposed to wrap their head around all of this.

I will walk you through the details once I have a moment to sit down. There are many moving parts to consider in a scenario like yours. In short, you need to pay taxes; the best approach for your situation would be to report it as foreign earned income. While the rate isn't ideal, you should recover a significant portion of what you pay through your annual tax return.

urbanwalker72 said:Well..

Quavo:

It only recently dawned on me that I might actually be liable for taxes on this, and based on all the threads I've been reading during my research over the last few days, it looks like I definitely am.

You certainly should.

Quavo:

From what I can gather, I'll probably have to deal with interest charges and maybe even some penalties since I'm behind on my filings.

Just more work on your plate. Let's not overcomplicate things; you'll likely find a way to navigate this without any major issues.

Quavo:

Here is the breakdown of my situation: • I am a full-time student • I've been earning money online through gaming since April 2018 • This is my only source of income • I make an average of roughly $1667 per month • Funds go to PayPal, then I transfer them to my bank account

That all sounds fine.

Quavo:

My questions are: • Do I need to pay taxes? (yes, you do) • If so, what is the simplest way to handle this? • How can I calculate exactly how much I owe (taxes plus interest)? • Am I responsible for Social Security, Medicare, or sales tax, etc.? I'm feeling quite lost and a little anxious. It's incredibly overwhelming, and I don't see how someone with zero knowledge of the IRS or accounting is supposed to wrap their head around all of this.

I will walk you through the details once I have a moment to sit down. There are many moving parts to consider in a scenario like yours. In short, you need to pay taxes; the best approach for your situation would be to report it as foreign earned income. While the rate isn't ideal, you should recover a significant portion of what you pay through your annual tax return.

Thanks for the response!

But how exactly do I go about paying it, and where? How am I supposed to figure out the total amount owed? Is there any way to automate this process, or am I stuck doing all the math and manual payments myself?

Chloe Lee31 said:Thanks for the response!

But how exactly do I go about paying it, and where? How am I supposed to figure out the total amount owed? Is there any way to automate this process, or am I stuck doing all the math and manual payments myself?

Since you are a full-time student, the most logical approach would be to report this as foreign income. You would be responsible for federal income tax and state taxes. Much of what you pay initially is often recouped during the annual filing process the following year.
I would suggest leaving 2018 alone, as those tax liabilities have already been finalized. Attempting to revisit that year doesn't make much sense; you would essentially just be paying more money upfront only to wait for a refund later. Given how the bureaucracy typically functions, it is unlikely anyone will ever come knocking regarding that specific year again.

Essentially, since you checked with the IRS and saw no debt, it is because the responsibility lies entirely with you. You must calculate your own liability, submit the necessary paperwork, and handle the payments yourself.

Once you have navigated this once, it will become second nature. You can streamline the workflow by setting up Excel spreadsheets for calculations and creating templates for your payments. If this makes sense to you, I can provide some links with examples to guide you through the process.

urbanwalker72 said:Since you are a full-time student, the most logical approach would be to report this as foreign income. You would be responsible for federal income tax and state taxes. Much of what you pay initially is often recouped during the annual filing process the following year.
I would suggest leaving 2018 alone, as those tax liabilities have already been finalized. Attempting to revisit that year doesn't make much sense; you would essentially just be paying more money upfront only to wait for a refund later. Given how the bureaucracy typically functions, it is unlikely anyone will ever come knocking regarding that specific year again.

Essentially, since you checked with the IRS and saw no debt, it is because the responsibility lies entirely with you. You must calculate your own liability, submit the necessary paperwork, and handle the payments yourself.

Once you have navigated this once, it will become second nature. You can streamline the workflow by setting up Excel spreadsheets for calculations and creating templates for your payments. If this makes sense to you, I can provide some links with examples to guide you through the process.

Thanks for the explanation!

Alright, so I need to head down to the local IRS office to report this as secondary income. I don't think I'll have to worry about local surcharges since I'm living in a designated rural area
where the local tax rate is zero percent. Regarding the monthly filings, what exactly am I reporting? Is it my total earnings through the end of the month? And how do I settle the entirety of 2019? Do I need to calculate each month individually from the start of the year
and submit separate payments every month, or can I just take the cumulative amount I've earned since January and settle everything in one single payment? I am also curious about the timeline for filing and paying—will I be stuck running errands at government offices for weeks, or is it a relatively quick fix? One last thing: do I need to contribute to both social security funds or just the first one?

I don't quite follow your logic, but if I were in your shoes, there are a few things I’d probably look into first:
1. Just how much are you actually going to lose to taxes? If you go through with the plan you're thinking about, I suspect you might end up handing over closer to 45% of everything you make—just a heads-up on that.
2. You might want to check if you'd basically be flagging yourself for tax evasion for all of 2019 and taking a hit. I'm not entirely sure how the rules work for late filings, but I think you usually have an eight-day window after a payment to report it. Honestly, instead of throwing yourself under the bus, it might be smarter to just start paying taxes regularly on all your future income and maybe just... not mention what happened before.
3. Maybe look into setting yourself up as a sole proprietor or a freelancer. I'm not sure how that works specifically for students, but it's usually the cheapest way to handle taxes. Without hiring an accountant, it could actually be more cost-effective than whatever method leaves you losing 45%. It’s kind of like a flat-rate system; as long as you stay under, say, $50,000 a year, you just pay that set amount—I think it's around $150-$$667 a month, if I recall correctly.

P.S. There’s really no reason to panic or rush into anything right this second—the odds of anyone ever asking you about that specific income and tax situation aren't super high. Still, you'd definitely feel a lot better if you were staying current with it, especially if your earnings start to climb later on.

wearystag57 said:I don't quite follow your logic, but if I were in your shoes, there are a few things I’d probably look into first:
1. Just how much are you actually going to lose to taxes? If you go through with the plan you're thinking about, I suspect you might end up handing over closer to 45% of everything you make—just a heads-up on that.
2. You might want to check if you'd basically be flagging yourself for tax evasion for all of 2019 and taking a hit. I'm not entirely sure how the rules work for late filings, but I think you usually have an eight-day window after a payment to report it. Honestly, instead of throwing yourself under the bus, it might be smarter to just start paying taxes regularly on all your future income and maybe just... not mention what happened before.
3. Maybe look into setting yourself up as a sole proprietor or a freelancer. I'm not sure how that works specifically for students, but it's usually the cheapest way to handle taxes. Without hiring an accountant, it could actually be more cost-effective than whatever method leaves you losing 45%. It’s kind of like a flat-rate system; as long as you stay under, say, $50,000 a year, you just pay that set amount—I think it's around $150-$$667 a month, if I recall correctly.

P.S. There’s really no reason to panic or rush into anything right this second—the odds of anyone ever asking you about that specific income and tax situation aren't super high. Still, you'd definitely feel a lot better if you were staying current with it, especially if your earnings start to climb later on.

If he earns $1667 per month, after accounting for his foreign income, he is left with $1000, while $333 goes toward Social Security and $333 disappears into federal taxes.

It is worth noting that about 95% of those taxes can be recovered through an annual tax return, though Social Security contributions remain non-refundable.

Quincy:

2. Look into whether you could essentially self-report for tax evasion for the entirety of 2019 and face a penalty. I am unsure how the process works for late filings, but I believe the standard requirement is to report within 8 days of receiving payment. If you are considering throwing yourself under the bus, perhaps it would be wiser to simply start paying taxes regularly on all future earnings and leave the past unmentioned.

The concept of tax evasion exists primarily in the criminal code and specifically targets intentional misuse in commercial business operations to the detriment of the treasury, typically involving registered corporations. There is a higher probability of being struck by a meteor than facing a criminal charge here, as the necessary elements for such a case are entirely absent.

He isn't running a registered business, he isn't keeping formal books, the amount isn't substantial enough, and there is zero intent of wrongdoing—not to mention that 95% of the tax paid is eventually returned via a refund....

As for not mentioning the previous earnings, one could certainly take that route. It would be the simpler path.

Quincy:

3. Research setting up a sole proprietorship; I am not certain how it affects students, but a sole proprietorship is likely the most cost-effective way to handle your taxes. Without needing an accountant, it might even be cheaper than the method where you lose 45% to the government. It functions similarly to a flat-rate tax; as long as you don't exceed $45,000 annually, you pay that fixed rate, which I believe is roughly $1,200$667 per month.

If he registers as a sole proprietor, he may lose his status as a full-time student—at least in theory. Previously, these things weren't linked, though they might be now. In that scenario, besides the taxes mentioned, he would also have to pay $400 in monthly contributions.

Quincy:

P.S. There is no reason to panic or rush right now because the likelihood of anyone ever questioning that income or its taxation is minimal, though you would certainly feel more secure if you were paying them. This is especially true if that income starts to increase over time.

I concur. In my view, it is time to begin properly in 2020.

Magic Wand,

$1667 should actually be the gross amount rather than just the total cost, which would mean he's walking away with $3,225 instead of $1000.
Am I totally off base here? I was messing around with this calculator I found:
http://www.isplate.info/kalkulator-u...jelu-2019.aspx

And honestly, how does that whole tax refund thing even work anyway? Like, what's the actual law on that...

I remember there used to be this annual tax rate sitting at 12 percent, but if I recall correctly, they scrapped that entirely...

Thanks

wand suggests he report it as secondary income, which would cause his parents to lose their tax credits and leave them staring at a massive tax bill $2000 by next year.

Personally, I’d just have someone transfer it as a one-time gift from an overseas account—ideally one held in someone else's name—directly into his local checking account. If I made sure the total didn't exceed $16667 this calendar year, I wouldn't owe a single cent in taxes.

Alternatively, if his parents aren't actually relying on those tax breaks, he could just declare it simply as lottery winnings under the category of:

"games where the outcome depends on the player's choice of path or the sequence of play"

Then he could just pay a mix of 10%, 15%, and 20% rates and call it a day. Peace and quiet in Canada.

If you’re a full-time student working through a campus job, you’re entitled to $20 per year. It honestly feels unfair that online income isn't viewed with the same legitimacy as traditional student employment.
Personally, I wouldn't bother trying to claim back pay. Instead, just find a way to stop routing those funds directly into your checking account moving forward.
Maybe try using a Mastercard or something like PayPal... or even Revolut? I don't follow all the fintech trends closely, but there have to be options. 😉

Hey everyone,

I’m digging up an old thread here because it beats starting a new one from scratch. It looks like I’m about to start pulling in some side cash online—think surveys, website testing, and various other freelance gigs. I have a small business entity set up, but honestly, it’s just been sitting there gathering dust, so I need to nail down the exact procedure. If my clients (mostly overseas) pay me, am I responsible for issuing an invoice? Is that really the whole ballgame? Does a receipt from PayPal or a statement from Square count as valid documentation, or do I actually need to generate my own invoice and submit it to the IRS after the money hits my account? I’ll be receiving payments via PayPal or Square.

For context, I already have a full-time job. This business setup is just something I kept on the back burner from a while ago, though I haven't actually put it to work yet.

Thanks a lot,

Bradley King