Yes, you need to go through an entire Schedule C interview, create a "business," and enter it as income for that business.
Self employment income is subject to self employment tax beginning at $400. If there are expenses for her freelance work, then the net profit would be less however you must use the Schedule C to show that. If there were no expenses, then that income will be subject to the self employment tax as shown below, as well as personal income tax.
The self employment net profit is first allowed to be reduced for 7.65% (1.0 - .0765 = .9235), this is then multiplied by the net profit to arrive at the amount subject to self employment tax ($500 x .9235= $462). The balance is taxed as follows:
- $462 x 12.4% for social security tax = $57.28
- $462 x 2.9% for medicare tax = $13.40
As you can see that is $71 dollars of self employment tax which must be completed on the Schedule C and Schedule SE to accurately reflect and compute the tax.
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