Online paid surveys are a simple way to make money online in your spare time. Although online surveys may not be your favorite way of making money; however, they are a great way to make money anytime and wherever you are.
Online surveys make it possible to make money while watching TV, in an Uber, or on the train. You can earn a few bucks by just clicking some buttons on your mobile device.
Swagbucks is one of the legitimate online paid survey sites. Most of these websites do not pay direct cash; instead, they pay in points. However, you can make use of these points to buy gift cards with actual cash value. If you prefer cash to gift cards, you can sell any of the gift cards you earn.
This leads us to the question…
Are Incomes Earned From Online Paid Surveys Taxable?
Yes, such incomes are taxable.
Completing surveys and getting paid for doing so is synonymous with earning from a regular job. Although you are redeeming your earnings for gift cards, it is still a form of income because the gift cards are not gifts.
The main difference between earning online via online paid surveys and earning from your regular job is that no one withholds your money for taxes. You need to pay the taxes by yourself on any income or gift card you earn from completing surveys on paid survey sites. However, not everyone is expected to claim their online survey earnings for taxes.
We will shed more light on those that should claim their income from online surveys for taxes in the next section.
Who Should Claim Earnings and Prizes From Online Survey Sites?
According to US law, a company needs to inform the IRS if it has sent a payment of at least to anyone during the year. For instance, if you have made more than $600 from any paid survey site, you need to fill and submit a W-9 form. The form requests general details such as your name, address, Social Security Number, or Employee ID Number (EIN). You will then submit the form to the paid survey site that you are operating on.
During tax season, any online survey company that you have submitted the W-9 form to will give you a completed 1099-MISC form that shows the amount of money you have earned over the year. You need to fill this form to file your taxes.
If you have made at least $600 in income or gift cards from completing online paid surveys, it will be considered as taxable income. This implies that you need to pay taxes on the income you have made while filing your taxes for the year. You don’t need to fill a W-9 form if you earned below $600. However, you will still need to report the income earned when you earn at least $600.
Report All Income and Prizes
You need to report all income (that you earned by completing online surveys) on your income taxes. Ensure you track any payments you receive from PayPal in case your transactions need to be audited. Also, you should claim the cash value of gift certificates as well as other prizes you receive.
Even if you are not be required to pay taxes on the income and prizes you earn from online surveys, you need to report them to the IRS to be on the safer side. Your marginal tax rate will be determined by your income and tax-filing classification if you want to pay tax on income and prizes earned from online surveys.
All citizens of the United States that fall within the age of minority are expected to file income taxes. While doing their taxes, they will learn the amount of tax they will pay on their tax return.
Filling The W-9 Forms
According to the United States law, market research companies that are based in the United States must report any amount above $600 that they pay to any member within a single year. They need to report this to the IRS. If you earn this amount, the online survey company that you’re registered with will send you a form known as a W-9 form. The information on this form will be sent to the IRS.
In the W-9 form, you will fill in your identifiable details (such as your full name, address, SSN, and lots more). This information is strictly for tax purposes and this is the only time you need to provide your Social Security Number to an online survey company.
Where Should You Report Income Earned From Completing Online Surveys?
When you check your tax return (Form 1040), you will find a line entitled ‘Other income’. You can use this line to report the total amount you earned from completing surveys. This line is used for reporting different sources of income, like winnings from scholarships, lotteries, and rebates amongst others.
Earnings from online surveys fall under the subcategories, ‘Non-employee Compensation’ and/ or ‘Rewards’ can be added here. It may be the best practice to use Schedule C if you filled a W-9 form.
Helpful Tips For Paid Survey Taxes
If you are a newbie in the online survey market, and thus new to income taxes, some tips will help you when filing your tax.
You must track your income in a safe spot. You can do this by using a Word document, a finance tracking app, or a spreadsheet. Every time you receive an income, enter the amount received and the date. At the end of the year, when you need to pay tax, you will easily know if you need to complete a W-9 form.
If you know you will earn more than $600 in a particular year, ensure you prepare for tax season by saving 30% of every check or income you receive. This will help you to have the money you owe in taxes on the ground when you are called on to pay.
If you find it difficult to keep the money you save for taxes, you can pay the estimated taxes quarterly. This makes it easier for you to gradually pay your taxes instead of paying them at once. If you overpay your tax, you will receive the extra money back on your tax return.
Other Things That Are Considered During The Tax Season
In case you love looking for creative ways to make money, here are other taxable items that you need to pay attention to:
If you helped your neighbor to fix his chimney and his son mows your lawn in exchange, you need to report the value of the lawn-mowing services to the IRS.
2. Money won from gambling
You need to report any money that you win from gambling. You can, however, deduct your losses.
3. Income earned from your hobby
If you make money from blogging or other hobbies, you need to report such income. You can also deduct your expenses (such as travel or hosting) from your report.
4. Money made from illegal activity
If you earn money selling drugs, the IRS will like to know (as well as your local police :)).
The IRS also considers alimony as income.
6. Canceled debts
Do not ignore this. If a hospital helped you to reduce a medical bill or a creditor helped you to cancel a credit card debt, you need to report it as income to the IRS.
What You Don’t Have To Report As Income During The Tax Season
Here are some things you do not have to report as taxable income:
1. Child support
You don’t need to pay taxes on child support that you receive. The payer will pay the tax on the money.
2. Olympic medals and prizes
According to a 2016 law enacted under the administration of former President Obama, you will not pay taxes on your medals and prizes if you win in the Olympics or Paralympics.
3. Carpool money
Any money that you receive from passengers while driving carpool is not seen as income but as reimbursement for your expenses. However, if you drive a Lyft or Uber, you will pay taxes on the income earned.
How Online Survey Tax Works In The United Kingdom
In the United Kingdom, anyone that does not earn much from online surveys may be exempted from paying any tax on their income.
Britons are free to earn up to £1,000 from online paid surveys in a year without informing the HM Revenue and Customs (HMRC). This is in line with the tax relief that the government introduced in April 2017.
However, if you earn more than £1,000 in a year, you need to register for a self-assessment tax return. Your income from online surveys must remain below £15,000. If not, you can’t complete a simplified sole trader return to show your income, expenses, and profit or loss.
You do not need to rush and pay the tax. Because you have about nine months after the end of the tax year to pay your taxes to HMRC.
What should you do if your overall income is low?
If your earnings fall below the personal exemption threshold of about $10,000 (comprising the standard and personal deduction for an individual tax filing), likely, you will not owe the IRS anything after you have filed your return.
This threshold has to do with all income you have earned for the year, such as employment income, earnings from online surveys, and lots more. However, you need to file a tax return whether you owe the IRS or not.
How much will you pay in taxes?
One of the mistakes people make when they start earning as self-employed individuals is not putting in place the necessary preparations for their taxes. The amount you will pay in taxes will be determined by what you earn. A good rule to work with is to assume that you will pay nothing less than 30% of your income.
This will include federal, state, as well as local taxes. When you file your taxes, the amount you eventually pay may be less than 30%. This is usually the case if you have deductions. However, the best thing to do is to prepare for the worst scenario in case you need to pay a huge amount out of pocket.
What’s the purpose of a 1099-MISC?
If you have earned more than $600 in a year from an online survey company, you may be issued a 1099-MISC form instead of a W-9 form. The form will also request your full name and address just as we discuss for a W-9 form. You will also need to provide your taxpayer identification number (TIN).
As revealed in this article, incomes from online paid surveys are taxable if you earn at least $600 in a year. Also, you will pay taxes on pretty much any income you earn; and the money you make from paid survey sites and other apps are not left out.
Do you want to earn more income from online paid surveys in 2021? Check out our Get-Paid-To sites to learn more about how you can earn more income by completing simple tasks online. Don’t forget; the more surveys you complete, the more you earn.