1099-NEC and 1098T question

[dlp17]

My child is a first year college student and he worked for two different companies last year, he has one W2 and one 1099-NEC.  My question is he is not self-employed and doesn't has a business.  How does he report this since I got mixed answers.  Some said Schedule C and which is self-employed and he isn't.  Other said Schedule 1 under additional income.  The two incomes together is less than $6000.  Should he file his own income tax or I can file him under mine?  Other also said because his total income is less than $14600, I don't have to report them.  Is that true?  He also got scholarship but not a full ride.  Should I claim that 1098T since I did pay the balance of his tuition and room and board.  Please help.

[xmasbaby0]

Why did he receive a 1099NEC?   You say "he worked for two different companies"---which sounds like two jobs----one sounds like a W-2 job and the other one may have been work as an independent contractor.    Sometimes people who receive a 1099NEC think they do not "have a business" but do not realize that the IRS considers them to be self-employed.    Even $400 of self-employment income is required to be entered on a tax return----so please clarify why your child has a 1099NEC.

When you work as an independent contractor, you have to pay self-employment tax for Social Security and Medicare, even if you did not earn enough to owe "ordinary" income tax.

If you have self-employment income for which you will pay self-employment tax for Social Security and Medicare,  you will need to use online Premium software or any version of the desktop software download so that you can prepare a Schedule C for your business expenses.

https://ttlc.intuit.com/community/self-employed/help/how-do-i-report-income-from-self-employment/00/...

https://ttlc.intuit.com/community/self-employed/help/what-is-the-self-employment-tax/00/25922

https://ttlc.intuit.com/turbotax-support/en-us/help-article/import-export-data-files/enter-self-empl...

business-expenses-like-home/L1k6HJY4A_US_en_US?uid=m6jrthmp

https://turbotax.intuit.com/tax-tools/calculators/self-employed/

https://ttlc.intuit.com/community/business-taxes/discussion/self-employed-don-t-miss-these-tax-moves...

https://ttlc.intuit.com/turbotax-support/en-us/help-article/import-export-data-files/enter-schedule-...

[dlp17]

My friend has this company but she doesn't employ any employees.  She just ask people if they have time to help on projects which are manual work.  She only send people who helped/worked for her 1099.  When my friend needs help and my child is free, he worked.  He worked for about a month last summer.

[xmasbaby0]

@dlp17 So he was indeed an independent contractor.  He got paid for working but no tax, no Social Security and no Medicare was withheld.  He owes self-employment tax.

[dlp17]

So how do we identify he as an independent contractor/self-employed or not since he works for her once in a blue moon?  Reason I asked is I found this on IRS website and I am a little confused and want to understand fully...

If payment for services you provided is listed on Form 1099-NEC, Nonemployee Compensation, the payer is treating you as a self-employed worker, also referred to as an independent contractor.

• You don't necessarily have to have a business for payments for your services to be reported on Form 1099-NEC. You may simply perform services as a nonemployee.
• The payer has determined that an employer-employee relationship doesn't exist in your case.

If you weren't an employee of the payer, where you report the income depends on whether your activity is a trade or business. You're in a self-employed trade or business if your primary purpose is to make a profit and your activity is regular and continuous.

• If you're in a self-employed trade or business, you must include payments for your services on Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship). If you're self-employed, you'll also need to complete Schedule SE (Form 1040), Self-Employment Tax and pay self-employment tax on your net earnings from self-employment of $400 or more.
• There's no withholding of tax from self-employment income. As a self-employed individual, you may need to make estimated tax payments during the year to cover your tax liabilities. Refer to Form 1040-ES, Estimated Tax for Individuals for more details on who must pay estimated tax.
• If you're not an employee of the payer, and you're not in a self-employed trade or business, you should report the income on line 8j of Schedule 1 (Form 1040), Additional Income and Adjustments to Income PDF and any allowable expenses on Schedule A (Form 1040), Itemized Deductions. Refer to “Activity not for profit” in Publication 525, Taxable and Nontaxable Income for allowable nonbusiness expenses.

[xmasbaby0]

Did he just get paid in cash?

If you weren’t paid $600 or more, a business isn’t required to send you a 1099-NEC, but you still need to report the income.

To enter your self-employment income not reported on a 1099-NEC:

1. Type “Schedule C” in the Search box
2. Select the “Jump to” link.
3. Answer the general questions about your business (or select Edit at the work summary screen).
4. At the Let’s get income for… screen, select Additional Income.
5. When in your account, select the Take Me to My Return button on the main screen.

If you did make $600 or more, contact the company or individual you worked for.

[dlp17]

Yes, she paid him cash/check and asked her why she didn't give them W2.  She said the people that work for her aren't really her employees and she said 1099 is easier.

[xmasbaby0]

Sure---because she does not want to pay the employer portion of Social Security or Medicare or bother to withhold tax.  It is easier for her and costs her less.  She will certainly be preparing her own Schedule C for her business expenses and will enter the amounts she paid to contractors as a business expense.