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Ed Johnson
Ed Johnson, Tax Preparer
Category: Tax
Satisfied Customers: 10760
Experience:  GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
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I am employed full time, and sell Mary Kay on the side. I

Customer Question

I am employed full time, and sell Mary Kay on the side. I have yet to make a profit for the $3600 I put out in 2007 to start up. I only sell to my family and friends, which means only 1 sale a month. I did not make over $400 during 2008, so do I need to claim self employment on my taxes? Mary kay did not send me any type of 1099 form, so I am assuming I did not make any profit. Also I am already filing taxes since I am employed full-time at as business. Any help you can provide is appreciated. Thanks.
Submitted: 8 years ago.
Category: Tax
Expert:  Ed Johnson replied 8 years ago.

Dear Lax,


MaryKay will not send out a 1099 until they have paid you 600 or more.


The fact that they did not send you a 1099 for the 400 is merely a legislative issue where they are not required to issue a 1099 unless they pay you 600 dollars or more.


You could have made a proft. Profits are what is left after you subtract cost form revenues. (simplified definition).


You have to report self employment income of 400 dollars or more, and pay self employment tax on net profits of 400 dollars or more.


You can take the money yoiu invested as a business expense to reduce your overall income, but in order to do that you have to report your income.


So for example: You may be able to file an amended return for 2007 using scedule C or C-ez to capture that 3600 in business expenses. As a cash accounting tax payer, you can claim the expenses in the year they occured provided that your intention was to make money with this business activity.


In 2008, you can also capture business expeneses, but in so doing you will have to report the less than 400 dollars you earned.



Customer: replied 8 years ago.
Thank you. Now my question is... do I have to report any of it? I will probably not file an amended 2007 return. This is how I see my options... I can report my earning and take deductions for having a home office or I can just not report anything and still be ok with the IRS. Is this correct?

Expert:  Ed Johnson replied 8 years ago.

According to publication 17,


If you have a requirement to file a return, you have to report all self-employment income no matter how little.


The 400 dollars refers to self emlpoyment tax for which you have to file on form 1040-SE.



You must file a return if your gross income is at least as much as the filing requirement amount for your filing status and age (shown in Table 1-1). Also, you must file Form 1040 and Schedule SE (Form 1040), Self-Employment Tax, if:

  1. Your net earnings from self-employment (excluding church employee income) were $400 or more, or

  2. You had church employee income of $108.28 or more. (See Table 1-3.)


Use Schedule SE (Form 1040) to figure your self-employment tax. Self-employment tax is comparable to the social security and Medicare tax withheld from an employee's wages. For more information about this tax, see Publication 334, Tax Guide for Small Business.

Customer: replied 8 years ago.
The income I am referring is not unemployment income. I am referring to mary kay. Please re answer my question. Thank you.
Expert:  Ed Johnson replied 8 years ago.

I apologize.


If you have a requirement to file a tax return, for example, from another job, then you are required to file all self employment income. You report the income on schedule C or C-EZ.


If your Self employment income is 400 dollars or more, you have to also file form 1040-SE.


I apologize, I did not mean to confuse.


Reference: IRS publication 17