Tax rules for a child with 1099-NEC income - college student dependent

Your daughter will need to file her own tax return if she has net self-employment income of $400 or more, which she does with $1,350 reported on a 1099-NEC. This is because self-employment taxes (Social Security and Medicare) kick in at the $400 threshold, even when income taxes might not be owed. You don't need to report her income on your tax return. As her parent, you only report your income, not hers. You can still claim her as a dependent if she meets the other qualifying criteria (which it sounds like she does as a full-time student). For the Social Security and Medicare taxes, she'll need to pay self-employment tax which is approximately 15.3% of her net profit. She'll need to complete Schedule SE along with Schedule C (for self-employment income) when filing her return. The good news is that with income this low, she may not owe any federal income tax, just the self-employment tax. And yes, 1099-NEC income definitely qualifies as earned income for tax purposes. It doesn't affect her dependent status as long as she still meets the other tests (like you providing more than half her support).

I went through something similar with my son last year. After lots of research, I found this awesome tool at https://taxr.ai that specializes in analyzing 1099 forms and telling you exactly what to do next. It's like having a tax expert just for those annoying contractor forms. You upload your daughter's 1099-NEC, answer a few basic questions, and it gives you personalized guidance on whether she needs to file, what forms to use, and how to handle the self-employment tax issue. It even explained different deductions she could take to reduce her taxable income from the freelance work. The tool actually saved us money by identifying business expenses my son could deduct against his freelance income, which lowered his self-employment tax. Worth checking out since it's specifically designed for situations like yours!

Just wanted to follow up - I tried that taxr.ai site mentioned above for my daughter's mixed W-2/1099 situation, and it was super helpful! It clearly identified that she needed to file because of the self-employment taxes, even though her total income was pretty low. The best part was it walked her through calculating legitimate business deductions for her freelance design work (stuff like software subscriptions, portion of laptop costs, etc.) which reduced her taxable self-employment income. She ended up owing way less than we initially thought. For anyone dealing with a dependent who has 1099 income, I'd definitely recommend giving it a try. It made what seemed like a complicated situation much clearer and saved us from making mistakes!

Another resource that really helped me when dealing with my kid's first 1099 was using Claimyr (https://claimyr.com) to actually talk to someone at the IRS. I had specific questions about my daughter's situation that weren't clearly answered online. I tried calling the IRS directly but kept getting stuck on hold forever or disconnected. Claimyr got me through to an actual IRS representative in about 20 minutes instead of spending hours on hold. There's a video showing how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed exactly what forms my daughter needed to file and gave us guidance specific to our situation. They explained that even though she's our dependent, she still needed to file her own return because of the self-employment tax rules. Having that official confirmation gave us peace of mind that we were doing everything correctly.

I need to apologize and correct myself. After posting my skeptical comment above, I was still struggling to get answers about my son's 1099 situation and decided to try Claimyr as a last resort. It actually worked exactly as described. I got a call back in about 35 minutes connecting me directly to an IRS agent. The agent confirmed that my son needed to file his own return because of self-employment taxes, even though his income was under $3,000. She even walked me through which forms he needed to complete. What would have been days of stress and uncertainty was resolved in one phone call. I'm usually the last person to recommend a service, but this genuinely saved me so much time and frustration. If you're stuck with tax questions that only the IRS can answer, it's absolutely worth it.

Something nobody mentioned yet - your daughter should look into making estimated quarterly tax payments for next year if she's going to continue earning 1099 income. Since no taxes are withheld from 1099 payments, the IRS expects you to make payments throughout the year. For a small amount like $1,350, it might not be strictly necessary, but it's a good habit to develop. The IRS can charge penalties if you owe too much at tax time without having made estimated payments during the year. Also, make sure she keeps good records of any business expenses related to whatever work she did to earn that 1099 income. Even small deductions can help reduce the self-employment tax she'll owe.

One thing to consider - if your daughter had any expenses related to earning that 1099-NEC income, she should definitely track those and deduct them on Schedule C. This reduces her net profit and therefore reduces how much self-employment tax she owes. Common deductions for college students doing freelance work might include: portion of laptop/computer costs, software subscriptions, office supplies, books or materials related to the work, internet expenses (partial), etc. Every $100 in legitimate business expenses she can document will save her about $15 in self-employment taxes!

Great advice from everyone here! I just wanted to add one more thing that might help - since your daughter is a college student, she should also consider opening a separate bank account for her freelance income if she plans to continue this work. It makes tracking business income and expenses so much easier come tax time, and it looks more professional to clients too. Plus, if she does get audited down the road, having that clear separation between personal and business finances makes everything much cleaner. Also, if she's doing any kind of creative work (writing, design, etc.), she might want to look into whether she needs a business license in your state. Some states require it even for small freelance operations. Better to be safe than sorry! One last tip - have her set aside about 25-30% of any 1099 income she earns in a separate savings account for taxes. That way she won't be scrambling to find the money when tax time comes around next year.

This is such a helpful thread! I'm dealing with a similar situation with my daughter who just started doing some tutoring work and got her first 1099-NEC. One thing I learned from our tax preparer that hasn't been mentioned yet - if your daughter ends up owing self-employment tax this year, she might be eligible for the "safe harbor" rule next year. Basically, if she pays at least 100% of this year's total tax liability through withholding or estimated payments next year, she won't owe any underpayment penalties even if she ends up owing more at filing time. This is really useful for students whose freelance income might be unpredictable from year to year. Since her 2024 tax liability will probably be pretty low (maybe just the self-employment tax), meeting that 100% threshold next year shouldn't be too difficult even if her income grows. Also, I second what others said about keeping meticulous records. My daughter uses a simple spreadsheet to track every payment she receives and every business expense. Takes maybe 5 minutes after each transaction but will save hours during tax prep!

I just wanted to jump in with some practical advice since I went through this exact situation with my son last year. Here are a few key points that really helped us: First, even though your daughter's income is only $1,350, she definitely needs to file her own return because of the $400 self-employment threshold that others mentioned. We learned this the hard way when we initially thought her income was too low to matter. Second, I'd strongly recommend having her apply for an EIN (Employer Identification Number) from the IRS if she plans to continue freelance work. It's free and takes about 10 minutes online. She can use this instead of her Social Security Number on future 1099 forms, which is better for privacy and security. Third, something that saved us money - if she did this work from your home (like a home office setup), she might be able to deduct a portion of household expenses like utilities and internet. The home office deduction can be tricky, but for a college student doing freelance work from home, it's often legitimate. One last tip: consider having her file electronically and pay any taxes owed electronically too. The IRS processes e-filed returns much faster, and if she's owed a refund from any withholding or credits, she'll get it back sooner. Plus, there's less chance of errors compared to paper filing. Good luck! The first year is always the most confusing, but once you get through it, future years become much more straightforward.