They will each need to file their own returns. Since you are claiming them as dependents, you will want to make sure they check the box for someone is claiming them as a dependent.
A 1099-NEC is for non-employee compensation. They will enter this as self-employment income on Schedule C and pay SE taxes. They may also enter any expenses related to their work to reduce their income.
To file a Schedule C, here are the steps:
Since they are filing a return, they should enter their ssa-1099 as well, but that will not be taxed.
These links may be helpful to you:
@TB121P wrote:
I'm using Turbo Tax Home and Business on my computer and I entered my daughter's 1099-NEC in the Business section, but in the Personal Income section it's asks for Income from 1099-NEC there. Do I leave it blank or re-enter after having putting that info in the Business section of Home & Business?
No, do not enter the Form 1099-NEC again in the Personal section of Home & Business since it has already been entered in the Business section.
First, you never combine income with your own, each child must file their own tax return for their own name. If filing online, each account can only file one return for one person. You would need to set up separate turbotax accounts for each child. Or, purchase Turbotax on a CD or download to install on your own Mac or PC, and you can file multiple returns from one computer (each return is a separate data file like a spreadsheet or word processor file).
A 1099-NEC is usually issued when someone is self-employed or an independent contractor. This would require filing a tax return that includes a schedule C and schedule SE. They report all their self-employment income (including income from customers or clients that was not reported on a 1099), they can deduct ordinary and necessary work expenses (assuming they have accurate records to support the expenses) and they pay income tax and self-employment tax on the net profit.
However, let's make sure they really are self-employed. Sometimes, payers use the wrong forms. What did your daughters actually do to receive the money that was reported on the 1099s?
They will each need to file their own returns. Since you are claiming them as dependents, you will want to make sure they check the box for someone is claiming them as a dependent.
A 1099-NEC is for non-employee compensation. They will enter this as self-employment income on Schedule C and pay SE taxes. They may also enter any expenses related to their work to reduce their income.
To file a Schedule C, here are the steps:
Since they are filing a return, they should enter their ssa-1099 as well, but that will not be taxed.
These links may be helpful to you:
They both play cello and it was part of their program for performing musical concerts with a youth orchestra, and attending workshops related to music. The Program is After School Matters.
@TB121P wrote:
They both play cello and it was part of their program for performing musical concerts with a youth orchestra, and attending workshops related to music. The Program is After School Matters.
That's tricky. Getting paid for musical performances will almost always be considered self-employment income. However, if this was sponsored by a school, then it may be treated as "education" and that makes it taxable "other income" but not self-employment income. (Sounds like they have more than one 1099-NEC, so you would have to decide which are employment and which are education.) There would be no harm in reporting all the income as self-employment, except for paying the higher self-employment taxes. The upside is they would have higher earned income (which could allow them to open Roth IRAs which would be very smart since they presumably don't need this money to pay their own living expenses for now), and they would have increased disability and retirement credit in the social security system, although they are a bit young to be too concerned about that.
I would start by determining if you want to report any of the 1099s as education not subject to self-employment tax, or treat it all as self-employment. People here can give you more tips on how to enter other income or business income. You won't be able to file online for free, so it will be cheaper to buy Turbotax Home & Business to install on your own computer. You can use it to prepare tax returns for your family members for the original price of the software. (You will pay an extra fee for each state tax return you want to e-file, but it will still add up in your favor if you need to file 3 or more tax returns.)
If they are going to start filing tax returns as self-employed musicians, they need to think about their expenses. Mainly that will be mileage, strings and other supplies, and their instruments. They can't deduct mileage unless they own the car they use to drive to gigs, and you can't deduct mileage because it's not your business. But they could deduct uber, or plane tickets and hotel accommodations if they travel to perform. They can deduct strings, sheet music and other supplies. And they can deduct** their instruments if they own them.
**A business asset is an item with an expected life of more than one year. Usually, assets are depreciated, which means deducted over their expected life. For items without a legally defined period, the term is 7 years. Very roughly, they can deduct 1/7th of the cost as a business expense for the first 7 years the cello is used for producing income. That's in addition to travel and supply costs. However, if they deduct depreciation, they may have to pay income tax if and when they sell it, even though it is used. This is called depreciation recapture. If they purchase a new asset in business and it costs less than $2500, it can be taken as an expense all at one rather than being deprecated over time. There are a lot more rules that may be to their benefit, it can be complicated and they may want to look at some books on taxes for self-employment.
Lastly, as long as your children are living at home and under age 19 or under age 24 while being full time students, they are still your dependents unless they earn so much that they pay more than half their own living expenses. You can still claim them as dependents and they need to check the box that says "yes, I can be claimed as a dependent by someone else" when they file their tax returns.
The amounts were not a whole lot, one at $2000, the other at $1000.
@TB121P wrote:
The amounts were not a whole lot, one at $2000, the other at $1000.
That doesn't matter. If it is income from working, the taxpayer must report it and pay self-employment tax if the net income after expenses is more than $400, even if no income tax will be owed because their income is less than the standard deduction.
Even if it would be classified as "other income" because you treat it as a hobby or educational stipend, then it may still be reportable because of the SSA-1099 income and the "kiddie tax" rules. And since a 1099-NEC was issued, you can expect that if you don't file a return, the IRS will send a letter asking for an explanation or a tax payment.
I'm using Turbo Tax Home and Business on my computer and I entered my daughter's 1099-NEC in the Business section, but in the Personal Income section it's asks for Income from 1099-NEC there as well. Do I leave it blank or re-enter information after having put that info in the Business section of Home & Business?
@TB121P wrote:
I'm using Turbo Tax Home and Business on my computer and I entered my daughter's 1099-NEC in the Business section, but in the Personal Income section it's asks for Income from 1099-NEC there. Do I leave it blank or re-enter after having putting that info in the Business section of Home & Business?
No, do not enter the Form 1099-NEC again in the Personal section of Home & Business since it has already been entered in the Business section.