Q. Can you clarify - does she need to file because of the NEC even if she's under $12,950?
A. Yes, probably. The $12,950 filing rule does not usually apply when a 1099-NEC is issued. In simple terms, the filing requirement for a 1099-NEC is a mere $400*.
That said, you could take the position that the 1099-NEC is erroneous and the $12,950 rule applies because the income is really taxable scholarship. So, she doesn't need to file. But the IRS still has a 1099-NEC in their system and that could trigger an IRS notice.
*A dependent must file a tax return for 2022 if he had any of the following:
- Total income (wages, salaries, taxable scholarship etc.) of more than $12,950 (2022).
- Unearned income (interest, dividends, capital gains, unemployment, taxable portion of 529 distribution) of more than $1150 (2022)
- Unearned income over $400 (2022) and gross income of more than $1150 (2022)
- Household employee income (e.g. baby sitting, lawn mowing) over $2300 ($12,950 if under age 18)
- Other self employment income over $400, including money on a form 1099-NEC. Even non dependents must file if they have a 1099-NEC over $400.
