I have some spare money and would sometimes loan it to strangers in need on the internet. Let's say that I loan $100 and get $150 back after 5 weeks. Only that $50 should count as my income right? And how can I explain that to the IRS, since it's not a very formal loaning process.
In general, let's say that I sell a product/service to someone at a higher price than I bought it, how would my taxes work, given that I am not registered as owning a business?
It's actually very simple.
The extra money you get from loans is called "interest". Interest income is reported on your 1040 Schedule B.
The extra money you make from selling an asset for more than you bought it for is called "capital gain", and these are reported on your 1040 Schedule D.
The money you make for providing services to someone is called "earned income" and for self-employed sole proprietor (aka "I'm not registered as owning a business") it is reported on your 1040 Schedule C.
All tax preparation software support these schedules, and filling them is a trivial task for most.
