I'm trying to assist my grandson with his tax return. He has $4,431 on line 1 of form 1040. And $5,800 on line 8. I told him to enter his 1099 income on Schedule 1, line 8z "other income" because his work was just a one-time job. So, he shouldn't be subject to self-employment taxes.
He is only 18 years old and is a dependent on his parents' tax return. So, TurboTax limited his standard deduction, which it should. But it is calculated as $4,831 (income from line 1 plus $400). Shouldn't it be $10,631 (income from line 1 plus income reported on line 8 plus $400)?
If it should be $10,631, how can we change it?
His standard deduction is EARNED income + $400. If the self-employment income was on Schedule C, it would be included in his earned income, but since you have it as Other Income, it is not considered earned income. Am I self-employed? If the income was from working, it is self-employment and belongs on Schedule C.
By putting the income on line 8z, it is treated as unearned income. So, his standard deduction is only $4831 (4431 + 400).
If you want the $5800 to count as earned income, you have to treat it as self employment (15.3% tax vs 10% saved with a bigger standard deduction). It's not wrong to treat it as a one time gig exception, but that's the consequence.