Teen with no income sold tickets, won prize, has 1099s

[123champ]

My college going dependant teen who has no income otherwise, sold concert tickets online and will receive a 1099-K from Ticketmaster in her name.  She made a miniscule profit in that transaction.

She will also get a 1099-MISC for a small cash prize won in college.

Should she file an independent tax return just for this small amount of income?

Or should I include her 1099s in my return? If yes, where and how?

[Bsch4477]

The income is hers and would be reported on her return. If her net income is low enough she would not owe tax. She should be sure to check the box on her return saying that someone else can claim her. 

[NCperson]

@123champ she is still your dependent (because she is a student), so she need to indicate she 'can be claimed by some one else'.

if she earned more than $400 from those tickets (Taylor Swift?), she has to file a tax return and will have to pay self employment tax (15.3% of the amount she profited) - that is social securitry and Medicare tax.  

[rjs]

You cannot include your daughter's 1099-K or 1099-MISC income in your tax return under any circumstances. If she is required to file a return, or if she files even though not required to, the income has to be reported on her tax return. If she is not required to file, and does not file, the income does not get reported anywhere.

However, it's probably a good idea for her to file a return even if she is technically not required to. The 1099-K from Ticketmaster will show the total amount that she received, not the amount of profit. If she doesn't file a tax return, the IRS doesn't know how much she paid for the tickets. They will assume that the amount on the 1099-K is all profit. If it's $400 or more, they will think that she was required to file.

Whoever paid the "small cash prize" is not required to issue a 1099-MISC if the amount is less than $600. So if she gets a 1099-MISC, the amount is probably $600 or more, and again, the IRS will expect her to file.

Even if the 1099-K and the 1099-MISC are each below $400, the IRS will expect her to file if the total of the two is $400 or more.

[123champ]

Thank you all for the replies! I know now what to do -- will have the daughter file a separate return.

The ticket sale was more than $600 (hence the 1099-K) but the profit on it is chump change. (Those Ticketmaster fees are steep!)

The cash prize was $150, so I suppose it won't be reported to the IRS (or to her) on a 1099-MISC.

[rjs]

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@123champ wrote:

The cash prize was $150, so I suppose it won't be reported to the IRS (or to her) on a 1099-MISC.

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Even if she doesn't get a 1099-MISC for the prize, she still has to report the income on her tax return. $150 plus "chump change" will probably result in no tax being due, but she still has to file the return to show that.

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@123champ wrote:

will have the daughter file a separate return.

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I wouldn't leave her on her own to file the return. We see a lot of posts from people whose college students filed their own tax return and did not indicate that they can be claimed as a dependent. It causes a lot of trouble and aggravation for both the parents and the student. You want to make absolutely sure that she gets that right.

[NCperson]

@123champ whether or not income is reported to the IRS via 1099-K, 1099-MISC or any other form, the taxpayer is still required to report all their world-wide income, 

[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. If your dependent child is under age 19 (or under 24 if a full time student), he or she must file a tax return for 2022 if he had any of the following:

1.          Total income (wages, salaries, taxable scholarship etc.) of more than $12,950 (2022) ($13,850 2023).
2.          Unearned income (interest, dividends, capital gains, unemployment, taxable portion of 529 distribution) of more than $1150 (2022) ($1250 2023)
3.          Unearned income over $400 (2022) and gross income of more than $1150 (2022)
4.          Household employee income (e.g. baby sitting, lawn mowing) over $2300 ($12,950 if under age 18)
5.          Other self employment income over $400, including money on a form 1099-NEC

Even if he had less, he is allowed to file if he needs to get back income tax withholding. He cannot get back social security or Medicare tax withholding.

In TurboTax, he indicates that somebody else can claim him as a dependent, at the personal information section (although he files his own return, it is not an "independent" return, he is still your dependent).

Other replies have suggested that the ticket sales (But not the prize) be reported as self employment income and pay self employment tax (SET).** If this is only sporadic income, it can probably be reported as "other income". Other income is treated as unearned income. 

*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.  This does not apply in your case. 

** Self employed persons pay their medicare and social security tax as "self employment tax".