$900 tax for $6500 income

[Wishwalker1979]

My mother in law made around $6500 babysitting in 2022. I'm using turbo tax to file and after putting in all the data it tells me that she owes around $900 for taxes. Compared to last year that she paid $80 this is big difference. Comparing =the deductions from 2021 I can see that she is not qualified for EIC and that's where the big difference is. Looking into EIC qualifications, she should be a citizen or a permanent resident and her income should be less than $14500 since she files single. Any idea why turbo tax disqualifies her for EIC credit? Does this even make sense to pay $900 in taxes when you make so little?

Thanks for the help in advance

[MinhT1]

It looks like the $900 your mother-in-law has to pay is self-employment tax on her self-employed income of $6,500.

Babysitting is self-employed work and she has to pay self-employment tax of 15.3% on 92.35% of her income.

If this is her only income, she has no income tax to pay as her income is below the standard deduction, only self-employment tax.

As for the EIC, the tax laws have changed in 2022 compared with 2021 when the expanded EIC was applied, and she is not eligible for the EIC if she is 65 or older with no dependent.

Please read this IRS document for more information.

[Wishwalker1979]

I'm still confused. above you mentioned that $900 is the self employed tax she should pay then further down you mention she should not pay any taxes if her only income is only $6500 (yes she made $6500 the whole 2022). Let's say she is not qualified for EIC, should she pay $900 or something is wrong with turbo tax?

Thanks

[VolvoGirl]

There are 2 kinds of tax.  She doesn't owe any regular income tax on it but she owes self employment tax.

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 (If it is 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.  

[Wishwalker1979]

Thanks it makes more sense now. Now the next question is why she is not qualified for ECIC credit given that she is a permanent resident and made less than $14500?

[MayaD]

To be eligible to claim the EITC without a qualifying child, she must meet all the following rules:

• Meet the EITC basic qualifying rules
• Have her main home in the United States for more than half the tax year
  • The United States includes the 50 states, the District of Columbia and U.S. military bases. It does not include U.S. possessions such as Guam, the Virgin Islands or Puerto Rico
• Not be claimed as a qualifying child on anyone else's tax return
• Be at least age 25 but under age 65.