Does a Full Time Student making under $10,000. pay taxes? 1099-NEC

[javigilante8243]

My daughter is a FT student at college and in 2022 she made $6,500. She owes $490 in taxes this year.  Last year, she got all of it back ($80).  She did receive a 1099-NEC from summer work at my job. They did not take anything out and I am guessing that is it??  I submitted a SS-8 IRS form to investigate and determine, since she was suppose to be on payroll.

I thought you still had to pay in Social Security at any age, but was able to get Federal and State taxes back.  Is that correct?

Thanks in advance...

[xmasbaby0]

Sometimes people have the mistaken notion that students do not have to pay income tax.  Sorry--your daughter had self-employment income for which she owes self-employment tax for Social Security and Medicare.   If she earned even $400 of self-employment income she would be subject to self-employment tax.  

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

https://ttlc.intuit.com/community/self-employed/help/what-is-the-self-employment-tax/00/25922

https://ttlc.intuit.com/questions/2902389-why-am-i-paying-self-employment-tax

https://ttlc.intuit.com/questions/1901340-where-do-i-enter-schedule-c

https://ttlc.intuit.com/questions/3398950-what-self-employed-expenses-can-i-deduct

https://ttlc.intuit.com/questions/1901110-do-i-need-to-make-estimated-tax-payments-to-the-irs

https://turbotax.intuit.com/tax-tools/calculators/self-employed/

[VolvoGirl · Accepted solution]

A 1099NEC is self employment income.  To report your self employment income you will fill out schedule C in your personal 1040 tax return and pay SE self employment Tax.

You pay Self Employment tax (Scheduled SE) on a Net Profit of $400 or more on Schedule C.  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.  

But yes, if it was employee wages on a W2 she wouldn't have to file a return under 12,950 (Standard Deduction) except to get back any withholding taken out.  

[leeloo]

Only she can determine if she was an employee or a contractor. The IRS gives criteria. If she was misclassed, she can file some forms to show that. If she was a contractor, she must pay the 15.3% taxes on her profit. 

Under common-law rules, anyone who performs services for you is your employee if you can control what will be done and how it will be done. This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed.

1. Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
2. Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
3. Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

However, the only way around this, is to file a Form 8919. The qualifications and instructions are available in the link below.

Workers who believe they have been improperly classified as independent contractors by an employer can use Form 8919, Uncollected Social Security and Medicare Tax on Wages to figure and report the employee’s share of uncollected Social Security and Medicare taxes due on their compensation. See the full article Misclassified Workers to File New Social Security Tax Form for more information.

[javigilante8243]

Thank you for the guidance and knowledge on this.  

Jeff

[javigilante8243]

Thank you for the last pargraph VolvoGirl.   I thought so, that is why I submitted the SS-8 form to have the IRS look at this and see if they will reverse it.  She was asked for her I-9, but never filled out a W-4.  I think the company was trying to be nice, but in the end it has her paying. 

[javigilante8243]

Thanks LeeLoo...

She did fill out the SS-8 form to look into the matter, but not the 8819.  Does that also need to be filled out as well?

[Mike9241]

I thought you still had to pay in Social Security at any age, 

there is an exception for

The tax benefits of employing your child
You can shelter yourself from paying most—if not all—taxes on the wages you’re paying your children if your business is either a 1) sole proprietorship, 2) a partnership where both partners are spouses, or 3) an LLC that has elected to be treated as either #1 or #2. Specifically, if you employ your child who is under 18 years old, their wages are exempt from:

Social Security tax
Medicare tax
Federal unemployment (FUTA) tax
Once they turn 18, you’ll have to start paying Social Security and Medicare, but they remain exempt from FUTA tax until they turn 21.

[leeloo]

Yes, if she wants to pay only her half of SE taxes. The IRS will go after the "employer" for their half if she is indeed an employee, not a contractor.

https://www.irs.gov/pub/irs-pdf/f8919.pdf