At what point do I have to report my business income?


I often hear from small business owners that they haven’t reached the point of needing to report their business income on their taxes because their expenses are still larger than their income.

Well, I want to clear something up for everyone. Since self-employment taxes start when you’ve earned $400 or more of self-employment income (doesn’t include W-2 wages), the IRS wants you to report that income as soon as the gross income is at or above $400.

Gross income is the money you receive before any fees or expenses are deducted. So, if I received $300 from a client, that is my gross income. Once I deduct expenses, what’s leftover becomes my net income. Let’s say I have $100 in expenses. My net income would be $200.

Don’t be fooled into thinking that just because your expenses created a loss for the year that you don’t have to report your income!

IRS Letter 4464C: Am I Being Audited?

Form 1099-R Box 7 Distribution Code Meaning


Amy Northard, CPA

The Accountant for Creatives®
+ taxes + bookkeeping + consulting
+ Hang out with me over on Instagram!


  • Thanks for clarifying. I never knew this! Thankfully I’ve been reporting since day 1..but what would one have to do if they should have been reporting but didn’t? File an amended return?

    • Amy Northard, CPA says:

      Yep! Just file an amended return as soon as the mistake became known.

      If the income was over $600 and reported on a 1099, the IRS will probably be the first to catch the mistake because they match those up with the tax returns.

  • Kelly McGraw says:

    Thank you, Amy! I never knew this either! I’ve been lucky enough to report a profit each year, but who knew?! Excited to learn more tips from your blog xo

  • Jordan says:

    Very important points to keep in mind here. It can be confusing running a small business understanding when taxes come into play. Thanks for sharing your advice on this!

  • Ayesha Depay says:

    OMG! This was so helpful thank you I am a newbie so I really didn’t know when to start reporting.

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Are things like taxes & bookkeeping getting in the way of your creative time? Let's Chat!
Bookkeeping & Tax Tips
Sign up for free tax tips and advice sent straight to your inbox!
By clicking on the submit button, you agree with our Privacy and Terms Policy.