Questions On Mom and Daughter Returns

[jmallard]

Hi,

I retired from tax preparation in 2010 and I find that my memory is a bit fuzzy on some of these topics.

Mom is single living with her single daughter, who was 19 at the end of 2020.  Mom has filed as HOH for the last 18 years. 

For 2020, daughter worked part-time as a waitress and earned $8544.00, lived with Mom all year and was a full time student for 2020.  Daughter also earned $163.00 from "Post Mates" as a self employed driver for food delivery.  She received no 1099 or W2 for this income.

My questions are:
(1) Since daughter earned a total of $8707.00, does this disqualify her as being a dependent of the Mom so now Mom can't claim HOH filing status ?

(2) Since the daughter's $163.00 earnings from Post Mates does not reach the $400.00 threshold, doesn't that mean she does not have to file a Schedule SE  for the income ? but she does have to file a Schedule C ?

(3) Daughter's W2 indicates an amount in Box 7 Social Security Tips.  This is included in Box 1 Wages.  Does she have to file a Schedule SE for Social Security Tax for this tip income ?

I am always grateful for the help I have received on this forum.  Thanks in advance!

Jerry

 

 

 

[Jim Oh Bkkr]

1) Was the 8700  spent on the daughters support?

2a) No SE

2b) I would, but I have seen others who would list it on Line 21 (or whatever it's called now.)

3) I deal with "tipped" employees very seldom, but IIRC, the employer should've taken care of this.  Are boxes 3 & 5 correct?

[Pacun]

Jim already reply correctly so I am going to repeat.

Salary for daughter is not a problem as long as daughter did support herself more than 50%. 

No SE, and you can file Schedule C if you want or "line 21". Both of them will yield no SE.

That entry on social security tips (box 7) has been already taxed and sometimes we, tax preparers, forget to enter and there is no problem because that amount has been already reported in Box 1 of W2.

since $8,700 is not a lot of money anymore, chances are that mom still qualifies for HOH and all other benefits. 

 

[jmallard]

Jim Oh Bkkr & Pacun,

Thanks for your reply and information.

Jim Oh Bkkr, the amounts in Box 3 and 5 are not the same. Box 3 is $7151 and Box 5 is $8544. 

Does this mean that the Box 7 tip income of $1393 has been taxed but has NOT been considered in the amount withheld for Box 3 Social Security Wages ?  Should Box 3 and Box 5 be the same amount ?
Do does this now mean the $1393 should be reported on Schedule SE ?

Thanks again.

Jerry

 

[Jim Oh Bkkr]

1 hour ago, jmallard said:

amounts in Box 3 and 5

Oops, brain fart!  I meant 4 & 6, i.e. proper amount of tax withheld.

[Gail in Virginia]

I think what Jim is getting at is if you take the amount in box 3 (social security wages) and the amount in box 7 (social security tips) and add them together, then multiply by 6.2%, do you get the amount in box 4 for social security withheld?  If you do, then you have no problem and that is usually the way that this works. 

[jmallard]

Jim & Gail,

Thanks for your responses.

Yes, adding Box 3 and 7, then multiply by 6.2% does equal the amount in Box 4.

Thank you both very much.

Jerry