minor filing taxes as babysitter

[skagfamily]

My daughter babysat for a family last summer and made about $2500.  When she filed her 2021 taxes, she paid almost $350.  Why did she have to pay if she didn't meet the Standard Deduction? 

[VolvoGirl]

Did she get a W2 for it?  If she got a 1099NEC or just cash that is self employment income.  Even though she didn't owe income tax on it she owes self employment tax.  Did it fill out Schedule C for her income?  About 350 would be the right amount for self employment tax.

Self Employment tax (Scheduled SE) is automatically generated if a person has $400 or more of net profit from self-employment.  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.  

[skagfamily]

She was paid by check. So for self-employment taxes, it doesn't matter if she didn't meet the Standard Deduction? Is there another way a babysitter can file taxes to avoid the SE tax?

[VolvoGirl · Accepted solution]

Only by getting a W2 from the family.  Then they pay the Social Security and Medicare taxes.  At least the employer parts.

Right, self employment is separate from the Standard Deduction and regular income tax.  She technically has her own business for it.  She can deduct any expenses she spent for the babysitting to reduce her profit.  

[Llb213]

What happens if the daughter establishes and LLC and conducts babysitting through the LLC? Will she still be liable for the same amount of taxes? 

[LisaS]

Yes, LLC with just one member (her) is still reported on a Schedule C on her tax return and is subject to social security tax.  Thee are a handful of businesses/people who are exempt (like ministers and notaries) but being a minor is not an exemption, sorry.