Reporting minor's income from Swagbucks, etc.

[mn301]

Hi,

  I trust tax experts can best advice here. Happened to find out that minor kid was earning Swagbucks, converting them into paypal money to buy giftcards, cryptocurrency via Cointracker and using it to again buy giftcards since late 2020 until the end of 2022. Never knew there was such a thing and now genuinely confused how to report that income. The minor kid since then closed all his accounts and didn't get any income tax form such as 1099-MISC or any other from those web sites (and they don't agree to send as well when asked.) Now what are the options here? If need to be reported, then how ? Do previous year taxes need to be amended too?

Thanks in advance for any and all pointers!

Best regards

[Mike9241]

for 2022

a return must be filed for him if any of the following apply:

•  his unearned income was over $1,150. (this would include gains but not losses from sales of the crypto + the Swagbucks,etc)
•  his earned income was over $12,950 (Swagbuhs, Etc,)
•  his gross income was more than the larger of—
  • $1,150, or
  • his earned income (up to $12,550) plus $400
• he had net earnings from self-employment of at least $400 (Swagbucks, etc)

2021

a return must be filed for him if any of the following apply:

•  his unearned income was over $1,100. (this would include gains but not losses from sales of the crypto + the Swagbucks,etc)
•  his earned income was over $12,550 (Swagbuhs, Etc,)
•  his gross income was more than the larger of—
  • $1,100, or
  • his earned income (up to $12,050) plus $350
• he had net earnings from self-employment of at least $400 (Swagbucks, etc)

2020

a return must be filed for him if any of the following apply:

•  his unearned income was over $1,100. (this would include gains but not losses from sales of the crypto + the Swagbucks,etc)
•  his earned income was over $12,400 (Swagbuhs, Etc,)
•  his gross income was more than the larger of—
  • $1,100, or
  • his earned income (up to $12,200) plus $350
• he had net earnings from self-employment of at least $400 (Swagbucks, etc)

1.  why do you mention trust expert? this income would normally be reported on form 1040  
2.  each year's 1040 is separate. so filing for some years may not be required unless he previously filed for that year in which case an amended return is required. 
3.  Swagbucks, etc (see later about crypto) would be reported on schedule C, as would any expenses related to this activity that can be supported (I doubt that there would be any)
4. conversion of SB's to giftcards etc would not be reportable nor would any expenses in connection with the conversions - a personal expense
5. using SB's to buy crypto is in itself not taxable. howecver, when he sells the crypto for the year of sale he has a capital gain or loss that must get reported. this goes on form 8949/ schedule D
6. certain years have a question about digital assets ie crypto that should be nswered yes
7. the above may not be everything that has to be taken into account since since only limited info was provided and there was no mention of whether prior year returns were filed
8. for 2020 and 2021if required, and no previous return was filed; it would either need to be prepared  manually or through the use of self-prepared apps like Turbotax (for 2020 and 2021 Turbotax can only be done using desktop software - full pc or MAC while other online apps may allow preparation online of these years) .  Since certain minors retuns can have complexities like the kiddie tax, i do suggest using an app rather than manual preparation. these returns must be mailed. Another consideration is if there is a state income tax.
9.  if you don't use Turbotax for any required returns for 2020 and 2021 you should continue using the same app for 2022. It just is simplier that way
10.  if preparing these returns seems daunting, then perhaps using a tax pro would be best but it would be costly. 
11. For additional questions about his returns please use this thread. 

[Hal_Al]

You do not report his/her income on your return*. If it has to be reported, at all, it goes on his own return. 

What you describe is unearned income. So, he will need to file a tax return if that income was more than $1150. 

A case could be made that this is self employment (earned) income. Less of it would be subject to income tax**, but he would have to pay self employment (social security & medicare) tax on earnings over $400.

*If his only income is from interest and dividends, Alaska PFD or capital gains distributions shown on a 1099-DIV, there is a provision for entering it on your return, using form 8814.

**A dependents standard deduction is the greater of  $1150 or his earned income + $400, but not more than $12,950. 

[mn301]

Thank you very much @Mike9241 and @Hal_Al ...really appreciate your replies. So, is it correct that he needs to then file his own separate tax returns (Federal + State) for 2020, 2021 and 2022 even though he is still a minor?? He has never filed so far. For 2020, apparently he used almost $100, ~$500 for 2021 and for 2022 he used ~ $1650 (Swagbucks,Paypal, etc.) + $500 for Crypto - all to buy gift cards. Can the TurboTax for these years can still be used ? For crypto transaction, can TurboxTax "figure out" capital gains and losses by connecting to Cointracker wallet(there is apparently such a thing)?

Should I be waiting to file his taxes before I file my regular taxes for 2022? The deadline is October of this year I understand (at least for some areas.) 

Thanks again and best regards

Confused one

[Mike9241]

So, is it correct that he needs to then file his own separate tax returns (Federal + State) for 2020, 2021 and 2022 even though he is still a minor? yes a minor must file a return if they meet any of the filing requiremntrs for that year as I provided.      as stated money earned from SB and related ativities would be self-employment income and if over $400 for any year a return needs to be filed.   for the Coinbase reporting see these threads. As stated buying giftcards woud seem to be a personal item and would not affect the filing requiremnts or the tax return reporting 

https://ttlc.intuit.com/community/taxes/discussion/entering-or-importing-crypto-from-coinbase-in-tur... 

https://ttlc.intuit.com/turbotax-support/en-us/help-article/cryptocurrency/download-csv-file-coinbas...  I do not know if reports are available for 2020 and 2021

https://www.bing.com/videos/search?q=how+to+import+coinbase+transactions+into+Turbotax&qpvt=how+to+i... 

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further you can find other threads by using this phrase as a search perameter (no quotes)

"how to import coinbase transactions into Turbotax"

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Turbotax only imports the transactions or they are entered manually.  CoinBase genrates a profit loss report that can be imported  (2020 and 2021?) 

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for 2020 and 2021 you need the Turbotax desktop software . TT says the premier version is needed for crypto transactions

https://turbotax.intuit.com/personal-taxes/past-years-products 

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2020 ans 2021 can be filed now by mail - no efile.

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2022 certainly (online or desktop  - you would need to download his 2021 taxfile if using online for 2022 so any 2021 info would be transferred) can be started and if there is a need for your joint return (kiddie tax) you can save it and finish when your returns are done.  if you e-file 2022 use zero for prior AGI since no timely return was filed. 

[mn301]

Thank you. Can a TaxPro best advise regarding how to proceed? Can TurboTax live support be used?

Can 2022 Tax still be filed without taking into account kid's taxes for now and then amended, if needed, later?

Thanks again and best regards