Tax Question....son is 14 and making lot's of $$$....???

Question

My son came to me this past summer and asked if I knew of any way he could make some money to buy a quad-runner. We live in a small town and there is not much to do or opportunities to make money....so I told him I'll think on it a while.

So I was in town and noticed people getting their new licence plates at the licence bureau and saw several woman & older people putting on the plates and some looked like they were having a hard time...then my IDEA!

I told my son to go to the licence bureau each day with my eletric screw driver and a couiple of hand tools and ask people if you can plut their plates on for a small fee

this was 2 Months ago....he does this every day from 3-7 and 4 hours on Saturdays.

Yesterday...there is a brand new Quad-runner in the garage..one that cost 6.5K
I asked him about it and he say's he bought it....then I question him further....turns out he's charging $5 to put on the plates and is doing 35-50 people PER DAY...and makes over $200 CASH DAILEY

my question is..TAXES...do I have to pay??? Does he have to file?? What do I do??

He has made 1000's of dollars in cash...he not sure how much other than it's between $1300-$1500 a week

Answer 1

shhhhhhh, its cash there is no way to track this.... if he were to pay taxes he would have to get a business liscense and all that mess......

i see it as no different from girls getting to babysit and keep the cash... also hes providing a service, in some states you cant tax that

and how lucky you are to have that office open those hours, state agencies never are open like that...

Answer 2

First off tell your son he's the reason I still have faith in America. Just look on here in Personal Finance at all the people whining on how to get rich or make quick money without putting forth any effort. Your son is doing!

I found this on the web about the child income tax rules: http://www.uscg.mil/Legal/la/topics/tax/childrenstax.html That should cover your main question.

Now you need to teach him the next step in being an entrepreneur (since he's got the salesmanship and drive skills going already).

He'll need to do a little bookkeeping:
He should get Quicken to set up his books on the computer, or a ledger if he wants to keep track by hand and a book on basic bookkeeping. He'll need to record his business activities, so he can provide you with his gross income & expenses for his tax return.

Have him dig out that receipt to see how much he's paid out and try to back track what he's earned so far.

Good time to to teach him about investing. Have him read a few posts on here about the money problems college students are having.

Some other recommended reads, The Millionaire Next Door, a book on Personal Finance & The Richest Man In Babylon.

Your son has tapped into a great source of cash for someone so young. If he can set some aside now he'll have a lot less to worry about later and he may have that enterpreneurial drive and do something really amazing.

Answer 3

Hmmm...very gray area here. You really need to talk to an accountant or tax advisor who is a friend. The reason I say this is because you need special advice. Like other have said this is sort of an "under the table" business. In other words he's paid in cash and there isn't much here to report. But legally he has to pay taxes and you don't want your son getting caught and having to suffer consequences (whatever that may be). In other words you want to talk to someone who knows the law, but also knows the liklihood of whether or not he'll get caught.

But I have to say your son is very industrious, he's doing what it takes to make money - I love that attitude. Now if only I can find my electric screwdriver....

Answer 4

Well, you've raised an enterprising individual. Now the question you are asking is do you want to raise an honest individual?

The cash he is collecting is income. He is required (by federal law and probably most state laws) to report the income and pay taxes on it. As many people have pointed out, the fact that he collects cash means he probably won't get caught if he doesn't pay taxes. But this is dishonest...which many people answering this question don't seem to have a problem with.

Your call, but I'd want my son to be an honest person as well as industrious.

Answer 5

What an enterprising kid. He will go far in this world. Legally he is supposed to be reporting all his earnings to the IRS but chances of him getting caught are pretty slim unless he has been running his money through a bank account. Why not just start up a legitimate service business next year and do things the right way. This will make a great entry on his resume or college application. Wish more kids were as willing to be creative and work for what they want rather than just expect their parents to provide it all.

Answer 6

no i dont think you have to file taxes but are you sure that is where he is getting all of his money?? you stated its a very small town but 50 people a day need licence plates put on hes charging 5 dollars each person and making 13-1500 a week thats alot of people a day for such a small town and thats not counting the ones who put the plates on themselves

Answer 7

Well he has no receipts.. no paperwork... there is no 1099.. and its not like he is keeping books. So there is really no way he is going to get dinged for a part time job at the age of 14.
But I doubt seriously that 35-50 people a day are asking him to put on the new plates per day, in a small town. It almost sounds like he is bragging.

Answer 8

Until he starts receiving a W2 Form or 1099, I would not worry about it. I Think what hes doing is a wonderful thing to help the Elderly. I wish more Teenagers had that kind of Drive. Don't worry about paying Taxes on his well earned cash. The time for that will come soon enough..

Answer 9

Technically yes he needs to file an income tax return...but also, your babysitter who you pay $20 to every two weeks to watch the baby so you can go to dinner should be filing a tax return too.

There is no record of him making this money except for the purchase of the 4x4. The government is not going to come after you or him for the money. It is the equivelent of him mowing lawns. The people who paid him aren't going to report the money they paid to the government...so I would not worry about reporting the income.

Answer 10

He is required by law to file and to pay taxes. That he is being paid in cash makes it less likely that he will be caught if he illegally fails to report the income but does not affect whether he is required to report it. This is self-employment, which means that he is required to file a Schedule SE and either a Schedule C or a Schedule C-EZ and to pay federal taxes.

Also, he may (or may not, depending on the state in which he is working) be required to charge his customers/clients sales tax and/or obtain a license from the lcoal government and/or pay the license bureau rent for the part of its parking lot that he is using and/or pay some state or local taxes.