Schedule C income Kiddie Tax

[cpabsd]

Doing a tax return for 16 year old child. 1099 Misc was received for cleaning his parents office. Investment income greater than $2000 may kick in the kiddie tax. I believe the Schedule C income is earned income so kiddie tax would not apply. Agree???

[DANRVAN]

A 1099? Parent's office? Are the parents partners or sole proprietors? If so then child's wages are not subject to social security. Are you preparing taxes for the child but not the parents?

[jklcpa]

Bonnie, you are correct. The kiddie tax doesn't apply to wages or self employment income.

As far as what danrvan said, if this was paid from a partnership, the child must be the child of both partners, so having a third partner or a partner other than a parent will knock that out. Also, the income would have to be paid as wages for it to be exempt from from FICA and Medicare taxes and the employer's match. Since it was reported on a 1099, the child would be subject to s.e. tax on this income.

[cpabsd]

The money came from the corp owned by mom. It was 1099 income,not wages. I prepare the parents returns as well. However, last night, I was just working on the kids return.

[DANRVAN]

Just curious why a 1099 vs W-2.

[michaelmars]

i can answer that, assuming its an s corp and they don't have workers comp or disability policies since the shareholders are the only ones on payroll. adding the child makes you have all of the above.

I sort of do the same with my kids, they spend the summer scanning back files so I can shred them. and the nice thing is since its earned income they can have an ira. its a nice gift to give your kids if you can swing it. 10k income, 5k ira, no taxes due but fica.

10k might sound high but figure you would give then 1/2 that anyway in allowances, gas money, date money, school supplies etc.