My daughter earned $3500 as a lifeguard. She got a 1099-Misc with line 7 filled out. I tried using my TurboTax and the tax was >$500. Almost no deductions. Why?

[VolvoGirl]

How did you use your account?  Did you do her return in your online account?  You might have overwrote your return and yours is gone.  Online is only good for one return.  

Or did you do a new return using the Desktop installed program?

Yes that is self employment income and she owes self employment tax on it.  $500 is about right.

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.  

[Korac]

Thanks, I was using my desktop TurboTax.  I am just very confused how a college student whose summer job total income was $3500 could owe $500 in taxes.  Seems unfair that 100% is taxable in such a small amount.  I guess she should have worked at the pool that had her as an employee

[NCperson]

it would have worked out the same way if she worked at a pool where she was an employee  

 She would have had half that withheld from her paycheck for social security tax and her employer would have paid the other half. presumably the employer would have paid her less per hour, knowing it had to pay half that tax itself. 

[VolvoGirl]

 If she was a W2 employee and made less than 12,200 she would have gotten back any federal and state withholding taken out.  But the employer would have held out 6.2% Social Security and 1.45% Medicare tax.  Those are mandatory taxes.

[Korac]

As self-employed it doesn’t look like she gets the standard (or any) deduction.  In 2018 she earned $4,200 at another pool as an employee and she ended up owing 0 and got back all that they withheld.  That is what is so bothersome.  Thanks

[NCperson]

no she did not get 'everything' back as an employee ...she did NOT get back the social security and medicare withholdings as an employee

she did not pay federal income tax on this summer's $3500 of income.   she paid social security and medicare which will benefit her when she retires - as @VolvoGirl pointed out earlier. 

so the point is that she did not make enough EITHER SUMMER to pay FEDERAL income tax.

However, she had to pay social security tax and medicare tax each summer.  Last summer, her employer paid half the social security and medicare tax. Presumably she was paid less because the employer had to pay the tax; this summer she presumably was paid more because she had the pay the tax - that is the way it would work in the perfect economic world. 

[VolvoGirl]

Right.  The Standard Deduction is subtracted from regular income (which includes W2 and 1099Misc income).  So she doesn't owe regular income tax on it.

BUT she still owes self employment tax on the 1099Misc income in addition to any regular income tax on it.  (But it's too low for reg. Income tax).