@bjshenjie wrote:
Thank you for answering.
1. Can my parents use TurboTax Self-Employment software and to pay self-employment without W-2? I didn't withhold any tax for them.
2. In the first line of 1040, do they fill in all $18000 that they make as self-employment? Then turbotax will calculate how much tax they owe?
3. They choose "self-employment without W2", but the amount exceed $2200. Will it raise a red flag to IRS? Is there a way to explain they are grandparents while filing tax?
4. In this case, do I owe any tax because i didn't properly file W-2 for them? What do I do? Will IRS contact me?
@macuser_22 @Hal_Al
#1 Yes, they can forgo the tax treatment for parents and file a schedule C as self-employer but then they will have to pay Social Security and Medicare tax on schedule SE.
#2 is not self-employed - it is W-2 income without the W-2. By entering it that way the income will go on the 1040 line 1 with "HSH"next to it.
#3 Quite likely the IRS might question it, but a simple explanation that now W-2 was required for a parent should satisfy them. The IRS expects a W-2 if over $2,200 - but parents do not need a W-2.
You can also report it as "Other Income" as suggested but the IRS is equally likely to question the source of the "other income".
#4 You will not be involved. The tax return with TurboTax is "self-prepared" by the filer.
Either way, they might have an underpayment of tax penalty if there was estimated tax paid during the year.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
