Do I need to file California state tax form because of my child's online income of $500 from a California company? We live in NJ.

[ny1301]

The CA company did not send us 1099 form because the amount is less than $600. My child is a dependent on my Fed tax return. But I don't have to include him because the deduction could be cancelled by AMT. 

[Hal_Al · Accepted solution]

No. That is not considered Calif. source income.

You do not report his 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 2018 if he had any of the following:

1.         Total income (wages, salaries, taxable scholarship etc.) of more than $12,000 ($6350 in 2017).

2.         Unearned income (interest, dividends, capital gains) of more than $1050.

3.         Unearned income over $350 and gross income of more than $1050

4.         Household employee income (e.g. baby sitting, lawn mowing) over $2100 ($12.000 if under age 18)

5.         Other self employment income over $400, including box 7 of a 1099-MISC

You can still claim him as  as dependent, even if he needs to file. His tax will be the same either way (assuming he has no other income). In TurboTax, he indicates that somebody else can claim him as a dependent, at the personal information section.

"But I don't have to include him because the deduction could be cancelled by AMT."  The $4000 (+/-) exemption deduction was eliminated, starting in 2018. It was replace by a $500 dependent tax credit.  Furthermore, there is a rule that says IF somebody else CAN claim him as a dependent, he is not allowed to claim himself. If he has sufficient income (usually more than $12.000), he can & should still file taxes. In TurboTax, he indicates that somebody else can claim him as a dependent, at the personal information section.  TT will check that box on form 1040.  

[ny1301]

Thank you for you prompt answer! My son is 15 yr old and he does online tutoring on behalf of that CA company. So if he has to file Fed tax return, he also needs to file NJ tax return and treats the income as NJ income? Why it's not a CA income? thanks.

[Hal_Al]

Yes, a taxpayer would normally file that income in his home state. I'm not familiar with the NJ filing threshold, but suspect he doesn't have enough income to have to file a state return.
It is not Calif. income because he did not physically work in CA. It was not earned in CA. A handful of states do tax "telecommuting income", but CA isn't one of them. NY & NJ do and that may be why you asked the question.

[ny1301 · Accepted solution]

Thank you for the clear explanation!