Does my 14 year old have to do taxes for babysitting money when it was less than $5000 this year

[melindajf2]

My daughter babysits for someone and she is 14. she will make around $4500 this year. Will she need to file if the person she babysits for puts her down on their tax return?

[SweetieJean]

She needs to file even if the person she babysits for doesn't.

[Critter1]

This presents a good opportunity to contribute to a ROTH IRA since she will have income but will owe no federal taxes ( FICA yes, state maybe but the feds no).

[Critter1]

She needs to file since the amount earned was more than $400 ....

If you have net self employment income of $400 or more you have to file a schedule C in your personal 1040 return for self employment business income. You may get a 1099-Misc for some of your income but you need to report all your income.  So you need to keep your own good records. Here is some reading material……

IRS information on Self Employment….
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center 

Publication 334, Tax Guide for Small Business
http://www.irs.gov/pub/irs-pdf/p334.pdf 

Publication 535 Business Expenses
http://www.irs.gov/pub/irs-pdf/p535.pdf 

Intuit has a new Quickbooks version for the self employed that may be useful :

 http://www.makeuseof.com/tag/quickbooks-self-employed-takes-the-hassle-out-of-accounting/

Self Employment tax (Scheduled SE) is generated if a person has $400 or more of net profit from self-employment on Schedule C.  You pay 15.3% for 2014 SE tax on 92.35% of your Net Profit 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.  You do get to take off the 50% ER portion of the SE tax as an adjustment on line 27 of the 1040.  The SE tax is already included in your tax due or reduced your refund.  It is on the 1040 line 57.  The SE tax is in addition to your regular income tax on the net profit.
 


PAYING ESTIMATES
For SE self employment tax - if you have a net profit (after expenses) of $400 or more you will pay 15.3% for 2015  SE Tax on 92.35% of your net profit in addition to your regular income tax on it. So if you have other income like W2 income your extra business income might put you into a higher tax bracket.

You must make quarterly estimated tax payments for the current tax year (or next year) if both of the following apply:
- 1. You expect to owe at least $1,000 in tax for the current tax year, after subtracting your withholding and credits. 
 
- 2. You expect your withholding and credits to be less than the smaller of: 
    90% of the tax to be shown on your current year’s tax return, or 
  100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months.)

[SweetieJean]

and remember her state taxes as well.

[Critter1]

She still needs to file to pay the FICA taxes if she doesn't get a W-2.   Asking the people she worked for how they are going to handle this tax situation is the first thing to do.  If they don't pay her as an employee and they use this on the Day Care Credit on form 2441 then the IRS will send a notice if failure to file along with penalties and taxes.

[bwa]

I don't believe she needs to file if she was performing the services in the child's home.

A single dependent must file a return in 2015 if:

• Their earned income (such as wages) was over $6,200 or,
• They earned more than $1,000 in unearned income (such as interest or gains on the sale of investments)
• They earned more than $400 in self-employment income

If you babysit in someone else's home it is very likely you were an employee, even if you didn't receive a Form W-2. If you were an employee you would not need to file if your babysitting income was under $6,200. (This limitation would not apply if you performed babysitting in your own home, where you would be considered self-employed and the $400 limit would apply.)

[bwa]

If they don't pay her as an employee and they use this on the Day Care Credit on form 2441 then the IRS will send a notice if failure to file along with penalties and taxes.

I'm not convinced the IRS is going to send a notice.  The IRS computer will know how much someone else claimed for the CDDC credit but not whether it was for self-employment or wages.  The computer will also know the child is 14. That should result in no notice as wages.

From Pub 926 (Household Employer's Tax Guide) - wages not counted as FICA includes:  An employee who is under the age of 18 at any time during the year. Exception: Count these wages if providing household services is the employee's principal occupation. If the employee is a student, providing household services is not considered to be his or her principal occupation.

[Hal_Al]

I concur with bwa, a babysitter, under 18, does not need to file a tax return with less than $6200 of income. Yes, there's a possibility (not probability) of an IRS inquiry because the employer filed form 2441. But, that's easily explained. The age limit is also an exception to the employer having to file schedule H.

This assumes the baby sitting was done in the client's home. Baby sitting in the 14 year old's home makes it self employment.