"To help taxpayers determine their withholding, the IRS is revising the withholding tax calculator on IRS.gov. The IRS expects the calculator will be available by the end of February. The IRS is encouraging taxpayers to use the calculator to adjust their withholding once it’s released.
The IRS is also working on revising the Form W-4, the employer’s withholding allowance certificate, which has been rendered outdated by the new tax law. The form and the revised calculator will reflect additional changes in the new law, including changes in available itemized deductions, increases in the child tax credit, the new dependent credit and the repeal of dependent exemptions.
The calculator and the new Form W-4 can be used by employees who want to update their withholding in response to the new law or changes in their personal circumstances in 2018, and by workers starting a new job. Until a new Form W-4 is issued, employees and employers should continue to use the 2017"
When I look at the new tax tables (thanks @rockvillemom ) they lump single and head of household together. Isn’t there still going to be a head of household filing status? I was fairly sure that in the end they kept it.That makes a huge difference for me.
There is a separate HOH standard deduction ($18000) but maybe not tax rate?
If they are going to treat a single with dependents the same as a single, just do it. We’ve already been getting screwed on the AOTC limits, and on things like FAFSA asset amounts.
Somewhat different. @calmom and several other posters in the taxable scholarships thread were helping me figure this out last month. (I am 17 and have never had any income before, so no taxes before TY2017.)
I have $4k income (stipend) from AFRL/USRA where I did research as an intern. No taxes were withheld; the income appears in box 3 of the 1099-MISC.
I’ve gathered that I can (ignoring state tax):
File it as self-employment income and pay SE tax. Tax: $565.
Treat it as unearned income, take the deduction of $1050 (for unearned income as a dependent), and pay tax on $1050 at my bracket and the rest at my parents’ bracket. Tax: $580.
Treat it as earned income, take the standard deduction of $4350 = earned income + $350, and pay no taxes.
Treat it as a taxable scholarship, which is earned for the purposes of the standard deduction, and take the $4350 standard deduction and pay no taxes.
FYI, my parents are dragging me to see their accountant and I’m required to pay whatever he charges for me to see him (probably $100), even though I’m fairly confident that the IRS will accept both options 1 and 2 due to my older sister’s experience.
[rant]
I’m somewhat grumpy that 1 and 2 are the most acceptable options, not because I’m a terrible citizen that wants to evade taxes, but because I feel that my income was earned - I showed up 40 hours a week at set times, etc. - and definitely was not “self employment.” If I had worked at McDonald’s, for instance, I would get any tax withheld back because it would be below the standard deduction. It does not seem fair that I must pay taxes simply because my employer places my income on a 1099 instead of a W-2.
[/rant]
Any thoughts - options that I’ve missed, options that definitely are incorrect, etc?
3 is not possible. It implies that both you and your employer have already paid FICA taxes but it did not happen.
1 is the most probable scenario. It will not be as bad as you calculated because you will file Schedule C-EZ and will have the opportunity to write-off all possible expenses. Unfortunately, you will have to file Form 1040 so the free tax software on the Web will not work for you. You need to find somebody who will give you free access to tax preparation software or you may have to pay for it yourself. It is still cheaper than $100.
So, no income taxes were paid on this stipend, and also no payroll taxes, right? So if this is earned income, then payroll taxes must be paid and #3 is impossible.
@twoinanddone I did ask an accountant (parent of a friend) whether there are multiple ways to treat a 1099-MISC payment in box 3, and she said that there are multiple correct ways and plenty of wrong ways. I know for a fact that the IRS accepts both options 1 and 2 due to my sister’s experience. I’m fairly certain that options 3 and 4 don’t really work, no matter how unfair I feel it is.
@Tanbiko Are FICA taxes paid for all income? I think I’m confusing income and FICA taxes. In “typical” jobs, e.g. random minimum-wage jobs, is FICA paid even if income taxes are not?
I know what a Schedule C-EZ is. I do not have any expenses that I can deduct.
I also don’t have a choice on going with my parents, and hence I have no choice on paying the $100. My parents won’t let me use tax prep software. Only matters for this filing season - next year I’ll be 18 and can choose my tax prep help.
@“Cardinal Fang” No income taxes were paid. However, since the total amount is below the standard deduction, I doubt income taxes need to be paid. I’m not sure about payroll taxes. Is that the same as Social Security? Social Security taxes were not withheld.
You received a 1099 misc. it was in excess of $400 earned. This 1099 misc is given to folks who are not on the w2 payroll…so you really were self employed.
That being the case, i believe you are required to file taxes. Since nothing was deducted from your earnings…you will need to pay something.
But it’s not an option…you must file. And yes, you will be required to pay self employment tax.
@thumper1 I never claimed that I have the option not to file (well, not since realizing that it’s 1099 misc income last month). If I am required to pay SE tax then it’s basically option 1 and that’s all there would be to it - it’s not enough income to pay income tax on.
Also, my stipend was technically for participation, not for services rendered. That would make it a scholarship, not self-employment income. But I had to show up 40 hours per week, perform research, etc.
That’s correct. Option one, and you pay the self-employment tax.
I believe that there is free online software you can use to complete schedule C-EZ and calculate self-employment tax via Credit Karma - https://www.creditkarma.com/tax
You could go ahead and complete forms there but not file just so you familiarize yourself with all the forms.
Can you negotiate a deal with your parents on the accountant’s fee? I can see why your parents might want the CPA to be going over all forms, but it’s a big bite out of your income if they insist when you have free or lower cost options.
Did you do work for it? Go into an office, write a report, EARN the money like wages? Income.
Did you receive the money without doing any work? Interest on a savings account, a scholarship, win the grand prize in the lottery? Unearned.
Sometimes scholarships are on 1099s in error because that’s how their accounting works. Make sure it is correct before you pay SE taxes on it.
You know, it doesn’t cost anything to run your numbers though TurboTax or TaxAct just to see how the amounts are applied. It will ask if you have W2s or 1099s and you enter the info. It might tell you before the end that you must file Form XX that isn’t supported by the free Turbo but at least you’ll know which form you need to file.
It is not so obvious to me that this is self-employment income, as I think that should/would be reported in box 7 “non-employee compensation”, not box 3 “other income”.
The 1099 instructions say
The OP should have either received a W2 (and had taxes, including FICA, withheld) or nothing.
If they didn’t get a W2, why wouldn’t this be considered “other income” which gets included on form 1040 line 21?
“I know what a Schedule C-EZ is. I do not have any expenses that I can deduct.”
Talk to the accountant (parent of a friend) about that.
“Are FICA taxes paid for all income? I think I’m confusing income and FICA taxes. In “typical” jobs, e.g. random minimum-wage jobs, is FICA paid even if income taxes are not?”
Yes, you have to pay 15.3% * 92.35% FICA tax (Social security and Medicare) on all your 1099 earnings minus expenses.
If you were an employee with W2 income the employer would deduct 7.65% from your paycheck. This is in addition to income taxes (that you do not owe).