1099m - Full-time student?

Question

Our son is 19 years old and a full-time student. He received a 1099m for $1092. We claim him as a dependent. Does he have to file? He referees soccer games. If he has to file, what category do I put him in?

Answer 1

Yes, he does have to file a tax return this year. He will need to file a regular Form 1040, because he needs to pay Self Employment Tax (Social Security & Medicare, or as they say, FICA taxes) on this income. He'll file as Single.

It is VERY IMPORTANT to mark the box on the front of the 1040 that says, "Check here if you are someone else's dependent." This lets the IRS know that he's being claimed on another tax return. When you do this, do NOT enter anything in the boxes on the right-hand side of the return for exemptions, because his personal exemption has been shifted to your tax return already.

The income from the 1099-MISC is considered self-employment income and will be entered on Schedule C (Form 1040). If he has any expenses against this income, they can be listed on there as well.

The income "bottom line" of the Schedule C goes to the front page of the 1040 as Self-Employment income. I think that's line 12, but I don't have a 1040 in front of me at the moment.

Also, this same "bottom line" amount on Schedule C carries to the Schedule SE or SE-EZ. This is the schedule that helps you figure the amount of Self Employment tax. At the bottom of this form, the very last line, is a place to enter 1/2 of the Self Employment tax. You'll want to be sure and enter this 1/2 of SE tax amount as an adjustment to income on the front of the 1040 in the adjustments section, and reduce the income amount by it.

On page 2 of the 1040, go ahead and enter the $5150 standard deduction and subtract that from his adjusted gross income, which will zero out his income. Do NOT enter anything for a personal exemption on there, just carry it on down as a zero entry. Taxable income will be zero, and the amount for tax from the tax table will be zero.

Now, this is the Important Step.. enter the Self Employment Tax amount from the Schedule SE (the entire amount, not the half) in the section marked Other Taxes, about 2/3 of the way down on page 2 of the 1040.

He'll have to pay that tax, and there isn't anything we can do about it. If I calculated it right, that should be about $154.

I tell all of my clients who have these 1099-MISC incomes that if they'll pinch off about 10% of the income from these things, and put it in a little "piggy bank" savings account and not touch it, they'll be able to pay their Self-Employment taxes out of that.

I know.. it's tough watching our kids start out paying taxes, but it's all a part of growing up and becoming an adult. It would be good if you could sit him down and go over it with him, since it does concern him, too. Maybe it will be a way to get him into the mindset of budgeting and so on, and thinking about saving for the future, etc. You never know.

Answer 2

If he has a 1099-misc for over $400, then yes he has to file. Business code on his schedule C of 713900 looks as good as any. He'll have to also file schedule SE to calculate his self-employment tax - that'll be around $150. He won't owe any income tax on that amount.