How to handle 1099-NEC for my college student child claimed as dependent?

Wait, so he has to file even though it's just $1,350? That seems like such a small amount. Does he need to file a full 1040 or is there a simpler form for students? And what about state taxes, does he need to file those too?

Yes, he needs to file because of the self-employment tax threshold of $400, even though it seems small. He'll need to file a regular Form 1040 and include Schedule C to report his business income and Schedule SE to calculate self-employment tax. For state taxes, it depends on your state's filing requirements. Many states have similar low thresholds for filing, especially for self-employment income, so he likely needs to file a state return as well. Some states have simplified forms for lower incomes, but he'll need to check your specific state's requirements.

How does taxr.ai actually work? Does it file the taxes for you or just give advice? My kid has a 1099 situation too but I'm wondering if we could just use TurboTax instead.

Is it actually worth paying for a service for such a small amount of income? Seems like overkill when we're talking about $1,350. Did they charge a lot for this?

It doesn't file taxes for you - it analyzes your tax documents and provides detailed explanations about what forms you need and how to handle specific situations. Think of it as an expert review before you file. You can still use TurboTax or whatever filing method you prefer afterward. The service was definitely worth it for us. While the income amount was small, getting the self-employment deductions right actually made a significant difference. They don't charge based on income amount but on the service provided, and considering the clarity it gave us about what deductions applied to my daughter's graphic design work, it saved us more than it cost.

How exactly does this work? Don't you still have to wait in the same IRS queue as everyone else? I don't understand how they can get you through faster.

This sounds like a scam. How can some random service get you through to the IRS faster than calling directly? They probably just take your money and put you on hold like everyone else.

They use an automated system that handles the waiting for you. You submit your phone number, and their system repeatedly calls the IRS, navigates the phone tree, and then calls you once they've reached a human agent. So you're still in the same queue, but you don't have to personally sit on hold for hours. It's definitely not a scam. The reason I tried it was because I kept getting disconnected after waiting for 2+ hours on multiple days. Their system is persistent and calls back if disconnected, which is what made the difference for me. I was skeptical too until I actually got the call back with an IRS agent on the line.

That's a great point! My son did buy some design software and a drawing tablet specifically for this work. Would those be fully deductible even though he also uses them sometimes for school projects?

You would deduct the percentage used for business purposes. So if he uses the software and tablet 70% for paid work and 30% for school, you'd deduct 70% of the cost. Make sure to keep receipts and documentation about the business use percentage in case of questions later. A good practice is to have him keep a simple log for a few weeks noting when he uses the equipment for business vs. personal use to establish a reasonable percentage. For items under $2,500, you may be able to deduct them fully in the year of purchase rather than depreciating them over several years, using the de minimis safe harbor election.

This is getting complicated fast! How would a college student even figure out estimated quarterly payments? Is there some simple calculation?