Do people usually pay taxes on small earnings?

4 Comments

I've been thinking about having a go at investing online with an app like Robinhood or eToro, and also buying some cryptocurrencies. But I was wondering about paying taxes on any earnings I might make on these. I'm not sure if this is an obvious question, but do people usually pay taxes on any small amount of earnings they might make through things like this? If you made say a couple hundred to a couple thousand per year doing this, would you bother paying taxes on them? If you didn't pay taxes on them and the government found out about them, would you get in a lot of trouble or would they just tell you to pay taxes on them?

I'm not trying to dodge taxes or anything, I'd gladly pay them if it was easy and straightforward. I'm just worried it'd be a major headache and the earnings I make wouldn't even be worth the stress of understanding it all, and the fear of getting in trouble for tax fraud just because I don't know how to do it properly. I know nothing about taxes and I'm worried it'd be way too complicated for me. So I'm worried I'd just be inviting trouble onto me by voluntarily telling the tax office that I'm making some extra earnings through investments.

But on the other hand I'm worried I'd get in real trouble for not paying them, even though I'd just be having a go at this whole investing thing really (mainly for a bit of fun), and I'd only be making a small bonus each year. What should I do?

Yes! Thats a major crime and your risking prison just for a few hundred bucks and some paperwork 1
You should. They probably won't catch you but if they do you could be in trouble 1
They won't catch you, but you should pay them anyway just because it's the right thing to do 0
No! They only care about millionaires dodging large taxs. Its imposible for them to catch you anyway 1
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Comments ( 4 )
  • donteatstuffoffthesidewalk
    2 years ago

    any brokerage should send appropriate forms in january with a summary of taxable profits & deductible losses

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  • 1WeirdGuy
    2 years ago

    Pretty sure no one really pays taxes on cryptos unless you are doing huge transactions your chances of getting audited are so low.

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    • olderdude-xx
      2 years ago

      Starting in the 2020 tax year; The US Federal Tax Forms specifically asks you if you bought or sold any crypto currency in 2020.

      Kinda hard not to report it; and if they find out you lied... Your life just got very difficult and the penalties alone will likely void any potential profit or advantage of crypto's

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  • olderdude-xx
    2 years ago

    I pay my taxes even on small earnings (I have 4 Schedule C businesses).

    However; I avoid trivial investments as the cost of doing the taxes will exceed any possible value of very small investment accounts.

    I have avoided paying for anything with Bitcoin (or other crypto currency) as the USA considered cryto currency as an investment. You have to report any profit/loss for each transaction; and pay the appropriate taxes.

    I figure that having my accountant doing the tax paperwork (even if I provide all the transaction/profit/loss data would be at least $50 each year). I'm not going to pay some trivial bill and then have $50+ extra accountant fees for doing the tax paperwork.

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