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Standard deduction and 1099-NEC

Forum|Forum|3 years ago
March 6, 2023
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Trying to help my daughter with her first time filing. She is a full time college student and had a couple of small sources of income in 2022. She made just over $7K in total, from two different sources, both sent 1099-NEC. I am just learning that not only standard deduction does not apply to this situation, but she is also taxed at 15% instead of the lowest 10% tax bracket. Is that so, is there any way around this and, if this the case, is this justified by some kind of rationale? Why is a college student who made a few bucks on the side being punished?

Not A Product Question

Best answer by SharonD007

Prize money should not be reported under Self-Employment Income and Expenses. You will not be able to view the Schedule C under preview my 1040. Follow the steps below to delete the 1099-NECs that you entered under Self-Employment Income and Expenses and then add the Income as prize money.

Go to the Wages & Income section of the tax return
Scroll down to Self-employment income and expenses and select Review
You should be at the screen Your 2022 self-employed work summary
- Select the trash can by Review to delete the Self-employment information
- Select Done
You will be back at the Wages & Income section
Scroll all the way down to the Less Common Income category (it’s at the bottom)
Select Start or Revisit beside Miscellaneous Income, 1099-A, 1099-C
Scroll down and select Start or Revisit beside Other Reportable Income at the bottom of the section
On the screen Other Taxable Income enter Prize Money as the description and the amount.

Your daughter’s tax return will not be subject to self-employment taxes only income tax. Just remember to check the box that says I can be claimed on someone else’s tax return if she is your dependent.

For additional information on prize money, please review the TurboTax article Everything You Need to Know About Filing Taxes on Winnings.

KrisD15

Please clarify,

What type of income is the 1099-NEC reporting and how did you entered it?

Did she end up with a Schedule C and need to pay Self-Employment tax (FICA)?

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C

circle11Author

Thanks so much for your response!

Entered it under "Self-employment income and expenses", two separate 1099-NECs. Is there another way? She participated in two sporting events and this is basically her prize money.

Can't see anything about Schedule C when I go to "Preview my 1040" in TurboTax. But from what I understand, yes this is a self employment tax.

VolvoGirl

Don't think prize money should be self employment on Schedule C. But for Schedule C,

You pay Self Employment tax (Scheduled SE) on a Net Profit of $400 or more on Schedule C. You pay 15.3% SE tax on 92.35% of your Net Profit (If it is greater than $400). The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare. So you get social security credit for it when you retire.

You are paying 15.3% for……

SS for employer 6.2%

SS for employee 6.2%

Medicare for employer 1.45% (on all wages & profit, no max)

Medicare for employee 1.45% (on all wages & profit, no max)