I closed my Etsy store because of my visa status. How do I report income received before I shut it down?

Feb 26, 2019

I started an Etsy store in August 2018 and was making some coasters. I then found out that because of my visa status (H4), I'm not allowed to have an online store as that might be considered employment. The Etsy store was promptly closed and outstanding orders were refunded. The gross revenue was $1,499, gross profit was $739, and net profit was $388.80. Should this be declared on a tax return, and, if so, how and under which schedule? I have spoken to a lawyer about this and was advised to ask a tax consultant for recommendations. 

Because your immigration status is not linked to your tax status, if you meet the test to be a U.S. resident (which you would if you lived in the United States all year), then this income should be reported on a Schedule C filed with your Form 1040. Schedule C will allow you to report the gross proceeds and your expenses, which will then be displayed on the income schedule of your Form 1040.

Even if you have no other income and may not owe income tax on this income, you should still file a tax return. If you don't, the IRS may generate a notice for self-employment tax on the amount of gross income reported by Etsy. As long as you prepare and file the Schedule C with your tax return, you will not owe self-employment tax on net income less than $400.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: Susan E. S. Howe, CPA, is principal of Howe Advisory in Strafford, Pa.

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