My daughter (dependent) who is 18 received a Form 1099-NEC as a camp counselor for $1,000 Box 1. What do I need to do?

[tonybaby5]

Can I add her income under for SSN to my return or do I have to create a separate return? This is her only income.

[Hal_Al]

Q.  Can I add her income  to my return?

A.  No. She has to file her own separate tax return.

You do not report his/her income on your return. If it has to be reported (and it does, see #5),  it goes on his own return.  Your dependent child must file a tax return for 2020 if he had any of the following:

1.          Total income (wages, salaries, taxable scholarship etc.) of more than $12,400 (2020).
2.          Unearned income (interest, dividends, capital gains, unemployment) of more than $1100.
3.          Unearned income over $350 and gross income of more than $1100
4.          Household employee income (e.g. baby sitting, lawn mowing) over $2100 ($12,400 if under age 18)
5.          Other self employment income over $432, including money on a form 1099-NEC

In TurboTax, he indicates that somebody else can claim him as a dependent, at the personal information section.

Although there is a provision for parents to add  a child's income to their return, it is limited.  Wages and self employment cannot be added. If his only income is from interest and dividends, Alaska PFD or capital gains distributions shown on a 1099-DIV, there is a provision for entering it on your return, using form 8814. 

[VolvoGirl · Accepted solution]

1099NEC is for self employment income.  She technically has a business for it.  She has to file her own return for it and pay self employment tax on it.

You don't include their income on your return. It would only go on their return if they are required to file one. To file a separate return for your dependent you need to set up a new account. Online is only good for one return per account. You can use the same email address for 5 accounts.  How to start a new online return
https://ttlc.intuit.com/community/using-turbotax/help/how-do-i-start-another-return-in-turbotax-onli...

Be sure on her return she checks the box that says she can be claimed on someone else’s return. 

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

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

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.

Here is some IRS reading material……
IRS information on Self Employment
https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center

1040 Schedule C Instructions
https://www.irs.gov/pub/irs-pdf/i1040sc.pdf

Publication 535 Business Expenses
https://www.irs.gov/pub/irs-pdf/p535.pdf

[tonybaby5]

Ok so I go back into TT and create a new return with just her name. Going through the forms etc. , she basically owes $142 federal tax and no state tax. I had to fill out a Schedule C and waiting on Form 8582 "Passive Activity Loss Limitations" to be revised. Does this all look normal? Why do I need Form 8582. Thank you!

[VolvoGirl]

Yes $142 is right for the self employment tax.  She doesn't owe any regular tax on the income since it is under 12,550.  Don't know why she would need 8582.  She doesn't have a loss.  

[tonybaby5]

Probably because its connected to Schedule C so TT is being cautious. Thank you for your help.