Youtube income and expenses for minor

[fstr1]

My minor child made about $700 in 2024 from Youtube. And I received a 1099-MISC. I can write most of that income off as legit expenses directly related to producing Youtube videos. To the extent that the income would drop below $400.

I am looking for the easiest option for 2024 taxes that do not create problems beyond 2024.

• Could I pass only the income after expenses to my child and forego a return for him. So I would enter the 1099-MISC and expenses on a schedule C and reverse out the remainder under pub 929.
• Alternatively, I could keep it as my income and expenses and pay the nominal tax on it. But would this create a problem if I want to do it differently in future.
• And if I do pass the full $700 to his return, should I claim the expenses on his return? And do I need to issue him a 1099-MISC?

Thanks!

[SusanY1]

If the income belongs to your child, then any return should be filed by (or on behalf of) your child.   Since there expenses that would lower the income below the reporting threshold of $400 of net income, it is not required to file a return. 

However, if the 1099 is issued to you and not to your child, then you need to account for it on your own Schedule C and issue the full amount to your child (and file a 1099 for the income paid to your child since it exceeds $600.)  

Since your child's net income is under $400, there would be no obligation for your child to file a return .  However, you should keep with your records information about both the income and expenses for at least six years in case of any IRS inquiry.  

Going forward, if the income belongs to your child it is best to update the paperwork with YouTube so that any tax documents are issued to your child. 

[rjs]

You don't have a choice about whose income it is. The income belongs to the person whose name and Social Security number are shown as the recipient on the 1099-MISC. That person has to report it on his or her tax return. And you have to report the full $700. You can then report the expenses on the same tax return.

If the income is the child's, and the net income after subtracting expenses is less than $400, and that is the child's only income, then technically the child does not have to file, as SusanY1 said. However, I would recommend filing the return anyway. The IRS doesn't know about the expenses unless you file the tax return. If they see $700 on a 1099-MISC and it hasn't been reported, they will assume that there are no expenses and it is all income. I think it's virtually certain that the child will get a notice from the IRS about unreported income. And it won't just be an inquiry. It will say that the tax return has to be filed, or it will be a bill for unpaid self-employment tax plus penalties and interest. Filing the tax return now will be a lot less hassle than dealing with an IRS notice a couple of years from now.

I don't know what you're referring to by "under pub 929." IRS Publication 929 was discontinued two years ago. There is no Publication 929 for 2024 tax returns.

[fstr1]

Apologies, I see I should have clarified better. I was trying to follow the guidance from this link:

https://ttlc.intuit.com/community/business-taxes/discussion/childs-youtube-income/00/2410658

The first thing to know is that YouTube does not allow a minor to earn income so it is apparently common practice to set up the Adsense account under the parent of the minor.

Anything that I have read that follows above guidance does not cover expenses.

I can also make a legitimate case that I covered all the expenses for my child.

If pub 929 is not in use anymore, what is the prevalent guidance currently for child income?

Thanks!

[rjs]

I will start off by saying that I don't have a good answer for you.

There is no reason that a minor cannot earn income, and many do. I think the basic problem here is that YouTube is making up its own rules that conflict with the tax laws. I assume the reason that they won't allow a minor to have an account is that YouTube wants a contract to protect itself, but a minor cannot enter into a binding contract. There must be a way around this. Child actors and models, for example, have income in their own names. But how this works is outside my area of expertise. Some minors have businesses and the business income is their own.

To answer your question about Publication 929, there is no single source of guidance for child's income because basically a child's income is treated the same as an adult's income as far as taxes are concerned. The tax rules for a child's income are the same as the rules for anyone else. The main exception is a child's investment income, but that's not the type of income that you are concerned about.

Here's what the IRS posted on its web site in 2023 when they discontinued Publication 929. You will not find this satisfactory, because it does not address your situation. (This is no longer on the IRS web site.)

"For tax year 2022 and later, Publication 929 will no longer be used to explain the filing requirements and other tax information for individuals who can be claimed as a dependent on another person’s tax return and how to report and figure the tax on unearned income of certain children (whether or not they can be claimed as dependents). Instead use Form 8814 and Form 8615. Forms 8814 and 8615 and its instructions have been revised to include the additional instructional material in Publication 929."

Form 8814 is used to choose the option to report a child's investment income on the parent's tax return. Form 8615 is the "kiddie tax," which taxes part of a child's investment income at the parent's tax rate. Neither form has anything to do with any other type of income.

But information about a child's income is not your concern, because you are not really dealing with a child's income. Under the tax law, the income on the 1099-MISC from YouTube is your income, not your son's. You have to report it on your tax return. The people in the thread that you referenced suggested various ways of canceling out the income on your tax return and putting it on the child's tax return. I don't think you will find any of these methods in any IRS source. They are just various peoples ideas for working around the problem. I am not aware of any IRS guidance on how to handle the situation.

As an aside, it's not clear to me exactly what YouTube is paying you for, or why the payment is reported on a 1099-MISC. Which box of the 1099-MISC is the income in? Depending on the specific type of income, it might or might not be possible to deduct expenses. The $400 filing threshold applies to self-employment income. It's not clear that this is self-employment income.

[fstr1]

Thank you for your thoughtful answer.

The earnings are reported in box 2 (Royalties). I do believe it is self employement income. I do plan to do my homework on expenses that are allowed.

I think the reason people are passing it through to the child is because it minimizes the tax they have to pay. But hopefully the effort is worth the reward for them. In my case it does not seem worth it. I just wanted to be sure that I am not missing some guidance that I should be following.

[rjs]

It's not self-employment. It's royalty income. Enter it under "Rental Properties and Royalties." When TurboTax asks what type of royalty income it is, select "Other Intangible (Patents, copyrights)." The income and expenses will be reported on Schedule E (not Schedule C). You will not pay self-employment tax on the net income.

The TurboTax screens can be a little confusing because many of the screens are for both rental income and royalties. Read the screens carefully.