How to report my kid income from tutoring?

[sdtaxnoob]

My 12yo daughter made a few thousand dollar last year from tutoring young kids.  She wants to contribute them to her Roth IRA.  I need to file tax for her earned income.  How would I go about filing for her income?  She doesn't have 1099 since the payment is mainly in cash.

[Mike9241]

since this is earned income she has to file her own return and report the income and related expenses on schedule C. with online you need a separate a/c for her return.

1. • If this is your first time using TurboTax for your daughter, create a new account with a unique User.... You can use the same email address for up to five separate accounts.

2. Start a New Return:

   • Once you’re logged in, select the option to start a new tax return.
   • Choose the appropriate tax year (e.g., 2023).

3. Enter Your Daughter’s Information:

   • Follow the prompts to input your daughter’s personal details, income, and any deductions or credits she may qualify for. 
     • TurboTax will guide you through each section, ensuring you complete all necessary forms accurately.

4. Review and File:

   • Double-check all the information you’ve entered.
   • If everything looks correct, proceed to file the return.
   • TurboTax will guide you through the e-filing process if applicable. Note that some situations may require mailing a printed copy of the return.

you don't need a 1099. when asked about receiving a 1099 answer NO. then you get to a section where you enter the gross proceeds she received.  for her schedule C, you can also enter the expenses she incurred in doing the tutoring. 

she will likely owe no income tax but net self-employment income above $400 is subject to SE tax which Turbotax will compute automatically.

The Roth IRA contribution limit is $6,500 per year for 2023 and $7,000 in 2024. But there are income limits that restrict who can contribute. Those income limits are based on her modified adjusted gross income, or MAGI.

how MAGI is calculated

To figure out your modified adjusted gross income (MAGI) take her adjusted gross income (AGI) and add back in any of the following deductions or exclusions if you took them (these are unlikely based on her age but just in case):

• Deduction for traditional IRA contributions.

• Deduction for student loan interest.

• Exclusion for foreign earned income and/or housing.

• Deduction for foreign housing.

• Exclusion for savings bond interest.

• Exclusion for employer-provided adoption benefits.

(Note: MAGI and AGI are the same amount for many people. See IRS Publication 590-A, Worksheet 2-1, for complete instructions on figuring MAGI for Roth IRAs.)

if you're the custodial parent you can claim her as a dependent. on her return the box that she can be claimed as a dependent must be checked. 

[mirwaise]

As a parent, do we also need to claim this tutoring income in our tax as an income?

[JohnB5677]

No, Her income should not be included on your tax return.

• I think you are considering the "Kiddie Tax".  
• This is a tax on a child's investment income that exceeds $2,500.

You can still claim the child as your dependent.

Please be sure that on Her Tax Return that in My Info she indicates that Someone Else can Claim Me as a Dependent.

[mirwaise]

Thank you. This was very helpful...