@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.
