Dependents with 1099

[Lindsaysv7]

We have a daughter who is 17 that will receive a 1099. She is a dependent still, do we file under our taxes and should we be putting money away for tax time next year?

[VolvoGirl]

You still can claim her as a dependent but she has to file her own return to report her self employment income, no matter how small.   Be sure on her return she checks the box that says she can be claimed on someone else's return.  

She may have to send in quarterly estimated payments.  You must make quarterly estimated tax payments for the current tax year if both of the following apply:

- 1. You expect to owe at least $1,000 in tax for the current tax year, after subtracting your withholding and credits.

- 2. You expect your withholding and credits to be less than the smaller of:

    90% of the tax to be shown on your current year’s tax return, or

  100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months).

She should set aside about 20% to cover self employment tax.  

The 1040ES quarterly estimates are due April 18, June 15, Sept 15 and Jan 16, 2024.  Your state will also have their own estimate forms.

Here are the blank Estimates and instructions…..

http://www.irs.gov/pub/irs-pdf/f1040es.pdf

Or you can pay directly on the IRS website https://www.irs.gov/payments

Be sure to pick the right kind of payment and year.....2023 Estimate

[KCariniEA]

Hey @Lindsaysv7 , your daughter will need to file her own tax return if the 1099 is more than $400. You cannot claim her income on your return. You can still claim her as a dependent, as long as she lived with you and did not provide more than half of her own support. Just make sure that she marks on her return that she will be claimed by another taxpayer.  Please refer to the article Should I Include a Dependent's Income on My Tax Return? 

Depending on how your daughter earned the income, she will likely need to pay Self Employment tax on it. When an individual has an employer, the employer withholds taxes for them. Since she did not have an employer, she will be responsible to pay both the employer and employee portion of the tax (15% of her gross income). Other than that, it's your daughter's money. Ask her how she'd like to save or spend it. Congrats on your go-getter!