[techie]

Hi,

I am an H1B holder with 40-hour full time job and this is my main source of income.

I participated in some of the online surveys as a hobby and got check payments in the amounts of $2/5/10 which came to a total of $400 for the year 2006. Also I sold some of my used stuff on eBay while I was relocating due to job transfer and generated around $800.

1. Is it OK for H1B holders to participate in such online paid surveys?
2. Is it necessary to file this income? (I guess the answer is yes, but just didn't want to assume anything)
3. Based on answer to Q1, If I declare this income to IRS, will this have any impact on my immigration status in US [current H1B status or any future statuses (H1B Extensions / Transfers / Green card / Citizenships)].

This is my first year of tax filing in US and just want to do things right.

Thanks for the help.

[AtlantaTaxExpert]

1) Yes, you can participate in those surveys.

2) No, such income is considered so small as to be insignificant.

3) It will have NO impact on your immigration status.

[techie]

Thanks AtlantaTaxExpert. That eased my mind very much as I was confused :)

1) Yes, you can participate in those surveys.

2) No, such income is considered so small as to be insignificant.

3) It will have NO impact on your immigration status.

[techie]

And, just to be more cautious, how much is the limit of other income that IRS considers as "significant"?

[taxsearcher]

Is ATE talking about self employment tax or regular income tax? This $400 is not your only source of income, right?

[AtlantaTaxExpert]

$400 is right on the edge of the self-employment tax exemption. Further, I do not consider the survey information to be self-employment income. It falls more into the area of a premium or prize money, which, though taxable under the income tax, would not be taxable as self-employment income.

Finally, the amounts are so small (assuming they are coming from several different companies and not the same one) that there is no requirement for them to report the income to the IRS, so there is no paper trail. The IRS would have no way of knowing the money was ever received.

[taxsearcher]

Finally, the amounts are so small (assuming they are coming from several different companies and not the same one) that there is no requirement for them to report the income to the IRS, so there is no paper trail. The IRS would have no way of knowing the money was ever received.

So it's OK not to report income if you won't get caught?

[AtlantaTaxExpert]

I did not say that!

But certain amounts of income are so small that it falls into the de minimus category.

The online survey income falls into this de minimus category.

Besides, if he declares the income on Schedule C, he can depreciate his computer and claim at least $15 per month of his ISP charge as valid offseting expenses. And I'm not even thinking hard about other expenses he could probably claim as well.

If the survey income was $1,000 or more, different story.

BOTTOM LINE: For the amount of money in question ($400), it's just not worth declaring it.

[taxsearcher]

I did not say that!

But certain amounts of income are so small that it falls into the de minimus category.

The online survey income falls into this de minimus category.

Besides, if he declares the income on Schedule C, he can depreciate his computer and claim at least $15 per month of his ISP charge as valid offseting expenses. And I'm not even thinking hard about other expenses he could probably claim as well.

If the survey income was $1,000 or more, different story.

BOTTOM LINE: For the amount of money in question ($400), it's just not worth declaring it.

OK, now you're confusing me. I thought you said it was not self-employment?

Second, can you give the OP a cite as to where the law would support the $400 amount being de mimimis?

:)

[AtlantaTaxExpert]

I do not believe it IS self-employment income, but if he decides to report it and has valid expenses to offset some of that income, Schedule C is the only available form to report the income AND the expenses. For sure, the expenses cited above will get him below the minimum amount required to be transferred to Schedule SE.

No, I cannot cite the IRC about $400 being de minimus, only practical experience with the IRS. If there is no paper trail, the IRS is not going to concern itself with $400 in miscellaneous income.

[techie]

A hypothetical question - let us say if 10 survey companies gave me checks for 200 each (in a year) but they didn't give any paper trail like 1099, does that still can go unreported?

Thanks

I do not believe it IS self-employment income, but if he decides to report it and has valid expenses to offset some of that income, Schedule C is the only available form to report the income AND the expenses. For sure, the expenses cited above will get him below the minimum amount required to be transferred to Schedule SE.

No, I cannot cite the IRC about $400 being de minimus, only practical experience with the IRS. If there is no paper trail, the IRS is not going to concern itself with $400 in miscellaneous income.

[taxsearcher]

Well, I guess if you hold to your line that it is not self employment income, then I wonder why he'd be able to claim expenses on Sch C? Those two ideas are mutually exclusive.

Second, your last point returns us to the question of: if I won't get caught, it's OK to cheat.

I assume that unless you have a legal basis for suggesting that it is excluded from income, then this "I won't get caught, so it is ok" argument must be your position. :(

[AtlantaTaxExpert]

Negative! That amount of money, even with no paper trail, is too large to be considered de minimus and should be reported.

If you reported on Schedule C to report some offsetting expenses, it is unlikely that the offseting expenses would be high enough to get money below the self-employment tax minimum. Therefore, you would report it as "Other Income" on Line 21 of Form 1040.

That is also where you could report the $400 you DID get in 2006 if you just want to report the income to be safe.

[techie]

But, if I report this income in "other", won't that be a problem as I am not supposed to get income other than my H1B salary? Would IRS report this to INS?

Negative! That amount of money, even with no paper trail, is too large to be considered de minimus and should be reported.

If you reported on Schedule C to report some offsetting expenses, it is unlikely that the offseting expenses would be high enough to get money below the self-employment tax minimum. Therefore, you would report it as "Other Income" on Line 21 of Form 1040.

That is also where you could report the $400 you DID get in 2006 if you just want to report the income to be safe.

[AtlantaTaxExpert]

One at a time:

TaxSearcher:

I did not and have never said it is okay to cheat, and I am insulted that you made that implication!

I am merely making the point that it makes little sense to report EVERY source of income, no matter how small, because the cost and effort needed to track such small amounts of income cannot be justified.

That is the reason why the IRS does not require banks to report interest amounts under $10, and does not require annual incomes under $600 to be reported on Form 941 Quarterly Employer Income Reports. That is the reason that the IRS will not pursue audits where the additional tax realized is under a set amount (I believe it is $250).

Techie:

And that is the justification I am using to advise you (Techie) not to report the on-line survey income. Your honesty in reporting this very small income may cause more problems than it is worth.

[techie]

Correctly said.

I have no problem in reporting my income. I am only concerned that it should not "create" extra problems on my H1B status now and any other H1B Extensions, GC process, etc.

Another doubt - Did you come across any cases like mine who reported/not reported and faced problems later on with IRS/INS?

You have been very helpful ATE. Thanks !

One at a time:

Techie:

And that is the justification I am using to advise you (Techie) not to report the on-line survey income. Your honesty in reporting this very small income may cause more problems than it is worth.

[taxsearcher]

ATE, you might be offended but your position, I believe, is wrong. Would you suggest that cash income (which may be hard to trace) should not be reported? Would you suggest that a business that receives a payment not reported on a 1099 leave this out of their income?

The receipt of the survey payments are income, plain and simple. You've stated that $400 is too small to worry about but $1,000 would be a problem. Where's your magic line at which point something becomes income that warrants reporting?

[AtlantaTaxExpert]

Generally, the IRS starts requiring the companies paying for these surveys to submit 1099s for any amount over $600, so that is my general cutoff amount for payments to individuals.

As for payments to business, that's a horse of a different color. Businesses have internal controls to track such money, and the IRS simply monitors those controls. That is what spot audits are all about.

In a perfect world, all income would be reported and everyone would pay low, fair tax rates. We all know that is not the case, and we also know the U.S. income tax system CEASED being fair decades ago, so we have pick our battles.

[taxsearcher]

ATE,

Whether the OP will end up being audited or not is really a different story. I'm sorry if it offends you but your answer is factually wrong. The income the OP received should be reported for tax. The OP may get away with failing to report the income, but there is no basis in the law for excluding it, as far as I can see.

TaxSearcher

[AtlantaTaxExpert]

Point taken!