With tax season already in full swing, you might wonder how the income and gift cards you’ve earned from taking online surveys need to be treated. Well, you’re not alone. Online surveys and taxes are oftentimes confusing to comprehend. However, it’s important to know that any income or gift cards might become fair game during tax season if you earn a certain amount.
Before you visit your CPA or file your own taxes, learn what you need to know about online surveys and income tax so you can stay on the right side of the law.
Are Online Surveys Taxable?
Yes! Completing online surveys and receiving pay for them is exactly the same as earning money at a regular job. Even if you’re redeeming your points for gift cards, it’s still considered income, since the gift cards are not actually a gift. The only difference between earning income from online surveys and a regular job is that no money is automatically withheld for taxes; you have to pay the taxes yourself on any survey income or gift cards you earn. However, not everyone needs to claim their online survey income for taxes.
Who Needs to Claim Income and Prizes From Online Surveys?
According to United States law, a company must inform the IRS if it has paid over $600 to an individual during the year. For example, if you earned more than $600 from us at Branded Surveys, you will need to fill out and submit a W-9 form. This form asks you for general information like your name, address, Social Security number or EIN (employee ID number). You then submit this form to us at Branded Surveys via email at email@example.com.
During tax season, any company to which you’ve submitted a W-9 will provide you with a completed 1099-MISC form indicating how much money you earned over the calendar year. You will need this to file your taxes.
If you have earned $600 or more in income from taking online surveys for money, it’s all considered taxable income. This means you will have to pay taxes on the income you have earned when you file your taxes for the year. If you earned less than $600 from online surveys, you don’t need to fill out a W-9 form, but you still need to report the income when you complete your taxes.
Where to Report Online Survey Income
If you’re filing your taxes yourself, there is a certain area on your tax return form (1040) where you will mark down your income from Branded Surveys. We recommend using line 21 to report survey income if it’s less than $600. You will also include any other supplemental income like scholarship money or lottery or gambling winnings in this section. You can check the subcategories “rewards” or “non-employee compensation” for online surveys.
If you’ve earned more than $600 from side gigs and received 1099-MISC forms, you will use Schedule C to report your income. Schedule C allows you to deduct expenses like internet, phone bills, or any other expenses you accumulated to earn your income. The more deductions you have, the less you will have to pay in taxes.
How Much Will I Pay in Taxes?
One of the biggest mistakes people make when they first start earning “self-employment” income is not preparing themselves to pay their own taxes. What you will pay depends on what you earn, and a good rule of thumb is to assume you’ll pay at least 30% of your earned income. This includes federal, state and local taxes. When you actually file your taxes, it may end up being less than 30%, especially if you have deductions – but it’s best to prepare for the worst-case scenario in case you have to pay a lot out of pocket.
Tips for Self-Employment Taxes
If you’re new to online surveys and income taxes, here are a few tips to help you out during tax season. First, keep track of your earned income in a safe spot. You can use a Word doc, a finance tracking app or even a spreadsheet. Every time you get paid, enter the date and the amount of income received. When you reach the end of the year, you will know whether you need to file a W-9.
If you know you’re going to pass the $600 mark this year, prepare for tax season by automatically setting aside 30% of each check or deposit you receive. This will allow you to have the money you owe in taxes on hand when you need to pay. If keeping the money set aside causes you to stress, pay estimated taxes quarterly instead. This allows you to gradually pay your taxes instead of all at once. If you end up overpaying, you will get the extra money back on your tax return.
If you still have questions about online surveys and income tax, don’t hesitate to reach out to a CPA for help. You don’t want to accidentally get into trouble with the IRS!