1099-NEC Income for 16 Year Old

[TN-Brad]

Dear TurboTax:

I have a 16 year old that has made his first income as a hockey referee, and he wants to use his 2023 income to fund a Roth IRA. It is unclear if the Premier version I have purchased will allow this type of entry or if I will need to  figure out how this type of income needs to be treated in the 2023 IRS Tax filing by using another software solution. 

Issues: 

1. Can 1099-NEC income be entered into a return for a minor using the Premier edition?

2. If yes, will the Premier edition allow the 1099-NEC income to qualify the minor for his first Roth IRA contribution?

3. If no, what steps do I need to take to file taxes for a minor that has received a 1099-NEC?

He is not a S-Corp, LLC, or any other type of business at this time. 

Thanks in advance for considering this situation!

[VolvoGirl]

 Yes the 1099NEC  is for self employment income.  If you have the Desktop installed program it can handle everything.  All the Desktop programs have the same forms.

To report your self employment income you will fill out schedule C in your personal 1040 tax return and pay SE self employment Tax. You can fill out Schedule C and enter Self Employment Income into Online Deluxe but if you have any expenses you will have to upgrade to Premium version. Or buy any of the Desktop programs. All the Desktop programs have all the same forms, but you will get the most help in the Home & Business version.

He will owe Self Employment tax on it.  Self Employment tax (Scheduled SE) is automatically generated if a person has $400 or more of net profit from self-employment. You pay 15.3% SE tax on 92.35% of your Net Profit greater than $400. The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare. So you get social security credit for it when you retire. You do get to take off the 50% ER portion of the SE tax as an adjustment on 1040. The SE tax is already included in your tax due or reduced your refund. The SE tax is in addition to your regular income tax on the net profit.

Yes he can use it to contribute to a Traditional IRA or a ROTH IRA.   If you have self-employment income you can only contribute up to your net profit reduced by the deduction allowed for the ER portion of your self-employment taxes. The 1/2 SE Tax amount will be on Schedule 1 line 15 which goes to 1040 line 10.