My full time student daughter, worked on a research project during the summer, and was paid $5,600 (1099-Misc). Can I still claim her & does she need to file tax return?

[mannotti]

In 2019, my daughter received a $5600 (1099-Misc) for the time she spent on a college summer research project, but I still paid for her education (tuition, fees, books), housing, and food for the whole year. Can I still claim her as a dependent? Will she have to file her own tax return?

[KarenJ2 · Accepted solution]

You did not state how old she is.  You can claim her as a dependent if the following qualifications are met

Qualifying child 

• The child can be your son, daughter, stepchild, eligible foster child, brother, sister, half brother, half sister, stepbrother, stepsister, adopted child or an offspring of any of them. 

• They aren't claimed as a dependent by someone else. 

• They are a U.S. citizen, resident alien, national, or a Canadian or Mexican resident. 

• They aren’t filing a joint return with their spouse. 

• They are younger than you and under the age of 19 (or 24 for full-time students). 

  • No age limit for permanently and totally disabled children. 

• They live with you for more than half the year (exceptions apply). - being away at college is an exception

• They did not provide more than half of their own support. 

If she received a 1099-MISC, she must file a tax return as anyone earning more than $400 of self-employment income during the year must file a return.  Her 1099-MISC is considered self-employment income if her income is entered in Box 7.  If she has no self-employed expenses to claim, she can use the Deluxe version of TurboTax.  If she does have expenses to claim, she needs the Self-Employed version or Home and Business.  

[xmasbaby0]

You do not mention her age---if she was under the age of 24 in 2019 you should be able to claim her as a qualified child.

MY DEPENDENT HAD A JOB

If your dependent has a W-2 for his after-school job, summer job, etc. you do not include the information on your own return. You can still claim your child as a dependent on your own return.  He/she can file his own return for a refund of some of his withheld wages (he won’t get back anything for Social Security or Medicare), but MUST indicate on it that he can be claimed as a dependent on someone else’s return.  (Supervise this closely or prepare it for him!)

If your dependent’s earnings were over $400 and were reported on a 1099Misc then he must file a return and pay self-employment tax for Social Security and Medicare.  You may want to use this version of TT for that:

https://ttlc.intuit.com/questions/1900583-what-is-turbotax-free-file-program

WHO CAN I CLAIM AS A DEPENDENT?

You can claim a child, relative, friend, fiance (etc.) as a dependent on your 2019 taxes as long as they meet the following requirements:

Qualifying child

• They are related to you.

• They cannot be claimed as a dependent by someone else.

• They are a U.S. citizen, resident alien, national, or a Canadian or   Mexican resident.

• They are not filing a joint return with their spouse.

• They are under the age of 19 (or 24 for full-time students).

• No age limit for permanently and totally disabled children

  •      They live with you for more than half the year (exceptions apply).

Qualifying relative

• They don't have to be related to you (despite the name).

• They cannot be claimed as a dependent by someone else.

• They are a U.S. citizen, resident alien, national, or a Canadian or Mexican resident.

• They are not filing a joint return with their spouse.

• They lived with you the entire year.

• They made less than $4200  (not counting Social Security)

• You provided more than half of their financial support. More info

When you add someone as a dependent, we'll ask a series of questions to make sure you can claim them.

Related Information:

• Does a dependent have to live with me?

• What does "financially support another person" mean?

• Can I claim a newborn baby?

[mannotti]

Sorry, she is 19 years old... Does the information still apply?

[mannotti]

Sorry, she is 19 years old... Does the information still apply?

[xmasbaby0]

Yes----she can be claimed as your dependent.  She was a full-time student under the age of 24.

[Carl]

This is important for your daughter.

worked on a research project during the summer, and was paid $5,600 (1099-Misc).

Your daughter will file her own tax return, and when she does so she must select the option for "I can be claimed on someone else's tax return".

What your daughter was paid is ***NOT*** self-employment income even though the income is reported in box 3 or 7 of the 1099-MISC. But because it's more than $400 *AND* is on a 1099-MISC, she is required to report it.

So that it does not get tagged as self-employment income (unless she wants to pay more taxes on it)  she needs to enter it as below in the TurboTax program.

Note to others: If you do this and the IRS determines it's self-employment income, your fines and penalties for filing a fraudulent return will be *HIGH*.

Reporting 1099-MISC (box 3 or box 7) that is not self-employment income

Under the Wages & Income tab (or Personal Income tab) scroll down to Other Common Income and elect to start/update Income from form 1099-MISC. Then click YES to indicate you have a 1099-MISC.

Enter the 1099-MISC exactly as printed, and then Continue.

Enter the reason you got this money – be it scholarship, bonus, streaking butt naked across the 50 yard line of the super bowl, whatever. Then continue.

Select None of these apply, then Continue.

Select No, it didn’t involve work….. and Continue.

Select ONLY the tax year for which this specific 1099-MISC was issued. Do not select the year that you received the 1099. Select the year for which the 1099-MISC was issued. Select no other year. Then Continue.

Select No, it didn’t involve an intent to earn money, then Continue.

Select NO, then Continue.

Click the DONE button, and that does it.

[tmangs28]

This process didn't work for us.  My daughter is still being taxed in TurboTax.  Any other suggestions?

[DoninGA]

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@tmangs28 wrote:

This process didn't work for us.  My daughter is still being taxed in TurboTax.  Any other suggestions?

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How much was the income?  If less than $12,950 and is not being reported as self-employment income on Schedule C it is not taxable.

[tmangs28]

It was only about $6,000.  I followed the steps that you laid out, but how/where do I check see the Schedule C to make sure it's not being reported as self-employment income?

Thanks!

[VolvoGirl]

If you have a Schedule C in your return it is being reported as self employment income.  Schedule C goes to Schedule 1 line 3 which goes to 1040 line 8.  So check those lines.  

And if you have a profit on Schedule C you pay self employment tax which is on the 1040 Schedule 2 line 4 which goes to 1040 line 23.

[tmangs28]

I started the return from scratch and immediately after entering the 1099-MISC information as you laid out, it shows tax owed of $569.  Then it is highlighting that Form 8615 Tax For Certain Children Who Have Unearned Income needs to be completed, and it's showing the 1099-MISC income on there as Unearned Income.  Then when I go through the questions, it changes the tax rate to my (her mother's) higher tax rate and the tax owed increases to $1,332 on this 1099-MISC amount of $6100.  Any ideas or suggestions what is going on?  It might be time to go see a tax advisor. (We filed this already by the due date, but then realized that something must have been wrong with the filing given the amount owed).

[Hal_Al]

If you student-dependent got this money for working for the school, it can be reported as scholarship-stipend income. After entering her 1098-T, on her return, she will be asked if there were any scholarships not reported on the 1098-T. Answer yes and enter the amount. When asked if any was used for room and board, answer yes. Then enter the amount you want to be taxable (usually all of it), in the pop up box. R&B are not "qualified educational  expenses".  So, this is how you tell TT that it is taxable. Note the wording at that screen “or other expenses”. You didn’t have to literally use the scholarship for R&B.  This will put it on line 8r of Schedule 1 (this line is new for 2022).

Alternatively (if she is not otherwise entering the 1098-T) : After answering no to having a 1098-T, answer yes to qualifying for an exception (that gets you to the entry screens). You will have to go thru the whole education interview to get to the scholarship screen. At the scholarship screen, enter the amount of the grant, as described above. 

Scholarships are a hybrid between earned and unearned income. It is earned income for purposes of the $12,950 filing requirement and the dependent standard deduction calculation (earned income + $400).  It is not earned income for the kiddie tax and other purposes (e.g. EIC).  If that is her only income ($6000), technically she is not required to file (it's less than $12,950). But, you may want to file anyway because of the 1099-MISC. 

This next steps are optional (and in addition to entering it as scholarship).  There's a chance the IRS  computers will not match the 1099-Misc to the Scholarship income.  If you want to try to ward that off, do this:

Enter at the 1099-Misc screen

On the next screen Describe what the payment was for

On the next screen select "none of these apply"

On the next screen select "No it didn't involve work like my main job"

On the next screen select "I got it in 2022" ONLY

On the next screen select No, it didn't involve intent to earn money

TT will put the amount on line 8z  of Schedule 1 as other income shown on a 1099-MISC

Then enter a line 8 deduction, for the same amount.  In TurboTax (TT), enter at:
- Federal Taxes tab
 - Wages & Income
Scroll down to:
-Less Common Income
      -Misc Income, 1099-A, 1099-C
       - On the next screen, choose – Other reportable income -  Answer yes to Any other Taxable Income -On the next screen, Enter the number with a minus sign (-) in front.  Briefly explain at description (1099-Misc reported as Scholarship income).

TT will put the same  amount on line 8z  of Schedule 1, as a negative number, zeroing out line 8z, but reporting the 1099-MISC. 

[tmangs28]

It worked!  Thank you so very much!  How in the world did you know how to do that?!?  (And how is the average American supposed to know/figure that out?!?)  Thanks again!!!