Dependent Tax Return - why does he owe $$$

[neef]

My son's AGI is 15k. But he "owes" both federal and NJ. 

Why?

Is this because his non-W2 wages were above a certain amount? He collected unemployment and earned income paid under a 1099B/1099DIV/1099MISC.

Line 1 5k

Line 7 2k

LIne 8 7k

[SweetieJean]

earned income paid under a 1099B/1099DIV/1099MISC

Please clarify. Earned income is not reported on those forms.  Do you mean unearned income? 

How old is your dependent?  The Kiddie Tax might be coming into play.

[neef]

I don't know what the difference is between "earned" and "unearned"? I just know he received 1099s

He is 19

[DoninGA]

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@neef wrote:

I don't know what the difference is between "earned" and "unearned"? I just know he received 1099s

He is 19

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Unearned income is income from interest, dividends or capital gains from investment sales.  Earned income is from wages received from an employer reported on a W-2 or income earned from self-employment reported on a 1099-NEC, 1099-K or cash.

If he has income reported on Form 1099-INT, 1099-DIV or 1099-B that income would be unearned income.

[SweetieJean]

Was he age 19 on 12/31/2021?

[neef]

Yes.

[neef]

I understand now.

So what does that mean for tax purposes? Is he taxed on the unearned income because it's over a certain amount? 

[JohnB5677]

I do understand that your son is 19 years old.  That is of no consequence from a tax point of view.  The amount of money and the type of money he received is of greater concern.  

• All of the money you described would typically not have any taxes withheld from it.  So if he did have a tax obligation, there wouldn't be anything to cover it.
• For a single taxpayer, the standard deduction is $1,100.  If he exceeded this income level he will incur taxes.
• Finally, you stated that he received a 1099-MISC.  This is considered self-employment and is subject to an additional 15.3%.tax.
  • The rate consists of two parts: 12.4% for social security and 2.9% for Medicare.
  • This tax is imposed regardless if he owes any other tax.
• However, if it is appropriate it can be avoided.

You are not self-employed, but TurboTax thinks you are because of the way you entered it on your return.

• Wages & Income

• Scroll to Other Common Income

• Select Income from a 1099-MISC

• Post your information from the form [Continue]

• Describe the reason for this 1099-MISC

• Post XXXX

• Does one of these uncommon situations apply? = Select None of the above

• Did the XXXX involve work that's like your main job? = No

• How often did you get income for XXXX? = Check Got it in 2021

• Did the XXXX involve an intent to earn money? = Answer No

@neef

 Edited 03/14/2021

[Hal_Al]

Q.  My son's AGI is 15k. But he "owes". Why?

A. Why do you think otherwise?

The maximum standard deduction is $12,550.  15,000 - 12,550 = $2450 taxable income.

But, dependents don't always  get the full $12,550 standard deduction.  A dependent's standard deduction is the greater of $1100 or his earned income + $350, but no more than $12,550.  Based on the numbers you provided, he gets a standard deduction of $5350.  15,000 - 5350 = $9650 taxable income.   The $2000 long term capital gain will be taxed at 0%.  

Follow the flow on form 1040.  The tax calculation for the amount on line 16 will be shown on the "Qualified dividends and capital gains worksheet.