What is the income filing threshold for 1099-NEC income of $1,400? Do expenses matter?

The self-employment tax filing threshold is $400 of NET self-employment income, not gross. So if your teen earned $1,400 but had legitimate business expenses of $850, their net self-employment income would be $550, which is above the $400 threshold. The $600 threshold you're seeing is what triggers the requirement for a business to issue a 1099-NEC to a contractor. It's not the filing threshold for the recipient. Even if your teen is below the standard income filing threshold as a dependent, if they have net self-employment income of $400 or more, they need to file a return to report the self-employment tax. The good news is that business expenses like the computer and software are deductible on Schedule C, as long as they were ordinary and necessary for the business.

I had a similar situation last year with my daughter's tutoring income. I found this tool called taxr.ai (https://taxr.ai) that really helped sort through all these self-employment rules for dependents. It analyzed her 1099 and helped identify which expenses were legitimate business deductions - saved us from claiming things that might have triggered an audit. The tool walked us through calculating the business percentage for her laptop too. Apparently the IRS looks closely at tech purchases for small self-employment gigs, so having documentation is super important. Might be worth checking out for your situation.

I want to follow up on my skeptical comment about taxr.ai. I decided to try it for my son's photography side gig and I'm honestly impressed. It flagged that I was calculating his camera depreciation incorrectly and probably saved us from an audit! The documentation guidance was super helpful too - I didn't realize we needed to keep such detailed records for mixed-use equipment. The best part was how it explained the difference between the 1099 reporting threshold ($600) versus the actual filing requirement ($400 net) in plain English. My son now understands why he needs to track his business expenses throughout the year instead of scrambling at tax time.

If you're having trouble getting answers from the IRS about dependent filing with 1099 income, I'd recommend Claimyr (https://claimyr.com). I spent HOURS on hold with the IRS trying to get clarification about my daughter's freelance income, but Claimyr got me connected to an actual IRS agent in like 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent I spoke with confirmed that the $400 threshold is for net self-employment income and explained exactly how to document the partial business use of equipment like computers. They also helped with some other questions about how my daughter's income affects my dependent care credit. Totally worth it instead of waiting on hold forever.

So I have to admit I was completely wrong about Claimyr. After my snarky comment I decided to try it myself since I had a question about my son's guitar lesson income and deducting his instrument costs. I got through to an IRS agent in about 20 minutes when I had previously hung up after sitting on hold for over an hour. The agent confirmed that my son needs to file his own return since his net income after deducting legitimate business expenses is still over $400. She also explained that we need to keep a practice log to justify the business percentage of the guitar. I'm still shocked it actually worked. Saved me from making a mistake on his return that could have caused problems for both of us.

Another thing to consider - if your child has earned income, you might want to help them open a Roth IRA! They can contribute the lesser of their earned income or $6,500 (2025 limit). Since your child probably has a low tax rate now, a Roth can be an amazing long-term investment vehicle. I started my daughter on this when she got her first 1099 income at 15, and she's already building a nice nest egg. Just make sure the income is legitimate and documented in case the IRS questions it.

Don't forget your kid might need to make quarterly estimated tax payments if they continue this self-employment gig! My son got hit with an underpayment penalty because I didn't realize this applied to him.