1099-NEC

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My son received a 1099-NEC for nonemployee compensation 1,626.16. Does he need to file a 1040 for it? Can I report it on my 1040 tax filing since I claim him as my dependent?

AnnetteB6Answer

Employee Tax Expert

Yes, he needs to file his own tax return to report self-employed income greater than $400 (gross income minus expenses). When his return is filed, be sure to indicate that he is being claimed as a dependent on another return.

You cannot include this income on your own return because it is earned income. Parents may only claim certain unearned income on their own return for their dependents.

To learn more, see the following TurboTax help articles:

Do I need to file a federal return this year?

Do I need to file my own taxes if I'm a dependent?

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AnnetteB6

Answer

Employee Tax Expert

You cannot include this income on your own return because it is earned income. Parents may only claim certain unearned income on their own return for their dependents.

To learn more, see the following TurboTax help articles:

Do I need to file a federal return this year?

Do I need to file my own taxes if I'm a dependent?

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

Hal_Al

Level 15

You do not report his/her income on your return*. If it has to be reported, at all, it goes on his own return. If your dependent child is under age 19 (or under 24 if a full time student), he or she must file a tax return for 2024 if he had any of the following:

Total income (wages, salaries, taxable scholarship etc.) of more than $14,600 ($13,850 for2023).
Unearned income (interest, dividends, capital gains, unemployment, taxable portion of 529 distribution) of more than $1300 ($1250 for 2023).
Unearned income over $450 and gross income of more than $1300.
Household employee income (e.g. baby sitting, lawn mowing) over $2600 ($14,600 if under age 18)
Other self employment income over $400, including money on a form 1099-NEC

Although it may be news to you that your son “has a business” (and most of the other people who get their first 1099-NEC); The IRS considers anything on a form 1099-NEC to be self employment income. Enter the 1099 income, at 1099-MISC and Other Common income / income from a 1099-NEC . TurboTax (TT) will complete Schedule C for you and allow you to deduct any expenses associated with this income. You'll also have to pay self employment tax (social security & Medicare) on any profits greater than $432. These types of payments are frequently done this way. Your "employer" is not the only one. If you try reporting the income as anything else, you chances of hearing from the IRS are higher.

What is self employment tax? It’s how the self employed pay social security tax. An employee pays 6.2% of his wages for social security tax and another 1.45% Medicare tax for a total of 7.65% In addition, his employer pays a matching 7.65%, for a total of 15.3%. A self employed person gets to pay the entire 15.3% by himself. But, he doesn't have to pay it until April 15 of the following year, as part of his income tax filing.

*If his only income is from interest and dividends, Alaska PFD or capital gains distributions shown on a 1099-DIV, there is a provision for entering it on your return, using form 8814. Enter at Less common income / Child's income.