What is happening is that your son is being subject to self employment tax. The Form 1099-NEC definitely implies self employment, however he may have expenses that he can utilize. The expenses must be specifically for the research analyst job only. If there were no expenses the self employment tax would be approximately $150 on that income alone.
The Form 1099-MISC does not indicate that self employment tax should be paid. In most cases, an intern should report the earnings on line 8 of the 1040 (Other Income) and are not considered self-employed. Therefore, an internship stipend is generally not subject to self-employment taxes.
Enter the Form 1099-MISC as follows: Search (upper right) > 1099misc > Click the Jump to... Link > Update/Edit your entry using the following information
This income is not business income, rather miscellaneous as indicated by your Form 1099-MISC.
It's important for you to select 'None of these apply" and then you should also select the following:
- Other Common Income > Form 1099-MISC
- 'No' on the screen 'Did the '____' involve work that's like your main job?'
- 'No' on the screen 'Did the '____' involve an intent to earn money?'
This will report the income without any business activity and it will show up on Form 1040, Line 8 (From Schedule 1, Line 8z).
You can use the Preveiw My 1040 to see the income on the appropriate lines of your return.
- With the Tax Tools menu open, you can then:
- View only your 1040 form: Select Tools. Next, select View Tax Summary in the pop-up, then Preview my 1040 in the left menu.
As we discussed previously, he will have only a minor amount to pay personal income tax on which does not include the self-employment tax. If any of the unearned income is qualified dividends or sales of capital gain investment he will have the special capital gain tax treatment on those pieces of income, if applicable.
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