pls advise: child making money, how to work on tax

[apple-Sweet-z]

my child is writing a book, and I think it looks amazing and plan to help publish it. we will prob invest quite a bit on third party services, including proof-reading, formatting, graphic design etc. 

question:

1- the tax consequences: since i am including the as my "dependent", will the cost be deductible under me when we do tax return? 

2- do we need to provide "1099" to service contractors? say, I pay 300$ to some graphic designer? 

I am sure there are a lot of entrepreneurs here. pls advise if you can. Bless you all.

[apple-Sweet-z]

i have the following info from TT: 

"Children who only have earned income from a job or self-employment, don’t make enough money to be required to file, or are filing jointly with their spouses are exempt from the Kiddie Tax."

Still not sure if we need to provide 1099 to contractors for paid services. 

[VolvoGirl]

You need to give a 1099NEC (previous a 1099Misc) to anyone you paid $600 or more to for the year. But not to corporations or for merchandise. You send the IRS a copy of the 1099NEC with the transmittal summary form 1096. These are due to the person by Jan 31 and to the IRS by Jan 31 also.

How to create W2s and 1099

https://ttlc.intuit.com/community/forms/help/how-do-i-create-w-2-and-1099-forms-in-turbotax/00/25869

You will need to manually enter the amount on your Schedule C as Contract Labor line 11.

[apple-Sweet-z]

Thank you very much for the detailed reply 🙂

[apple-Sweet-z]

A follow up question:

we have been working on the book together, with quite some cost, not published yet. 
is it possible to deduct the expenses?
is it a good idea to report it as a “hobby”, or a new business?

in TurboTax Home and Business desktop version, I tried to make it a “new business“, TT asks if me or spouse is doing the business, there is no option of making the child business owner (under 14yo).

any advice? Bless! 

[Vanessa A]

No, you cannot deduct the expenses if you are just writing a book.  

When you finally publish and sell the book, you can then deduct expenses if this will be your business.  If you report this as a hobby, you cannot deduct the expenses as hobby expenses are not deductible. 

You cannot add your child on your tax return to report their business or income.  If this is a partnership, then you would only report your portion of the business.  Also, since this business would be in the start up phase and not actually "live" yet, you would not be able to deduct the expenses.  If this becomes a business, then you would then deduct these expenses as your start up costs. 

[apple-Sweet-z]

Greatly appreciate your input.

1-

My child is <14yo, in my tax return as a dependent as of 2024. When my child eventually gets book published through KDP/Amazon, I imagine the sales will not be more than a thousand.

Whether it’s a business or hobby, I believe we parent will get 1099 for any sales as we, the parent, will be signing agreements with KDP. All 1099 need to be reported as “income”, big or small, correct?

2- if we are not sure if the book-writing will become a business in the future, should we just keep it as a hobby and NOT to deduct the expenses at all (even after the book is published)?

As a parent, I dreamed of my child being one of the “best sellers”, someday in the future 🙂

bless you all! 

[Vanessa A]

My child is <14yo, in my tax return as a dependent as of 2024. When my child eventually gets book published through KDP/Amazon, I imagine the sales will not be more than a thousand.

Whether it’s a business or hobby, I believe we parent will get 1099 for any sales as we, the parent, will be signing agreements with KDP. All 1099 need to be reported as “income”, big or small, correct? If you as the parent sign the agreement, then yes, the 1099 will come in your name.  Then you could keep the income as yours since you are helping with the writing or you could issue the 1099 to your child by nominee

2- if we are not sure if the book-writing will become a business in the future, should we just keep it as a hobby and NOT to deduct the expenses at all (even after the book is published)?  Yes, it is best to just keep it as a hobby for now since there is no way to predict the future when it comes to something like this. 

[apple-Sweet-z]

Thank you very much!