@twoinanddone I went into a lab, wrote code, wrote reports, attended meetings, etc. So I’d say I earned the income. I definitely was not “self-employed” in any reasonable sense of the word, though. Surprisingly enough, I’d like to pay as little tax as is legally allowable. TurboTax agrees with my calculation, assuming I treat it as SE income. I have no idea how to get it to consider it otherwise.
@calmom I cannot use Credit Karma, you must be 18 to register. No, my parents will not negotiate.
@notrichenough My sister (income from the same place, same box) filed this as “other income” (box 21) and got a request to pay letter asking for SE tax. She sent a letter back saying that it wasn’t self-employment, and the IRS replied with a bill for the amount under option 2.
@Tanbiko Other than commuting costs, I have no expenses. Those aren’t deductible.
Unfortunately, I am self-employed, and payees do that all the time – checks the “other” rather than “non-employee” when they have hired me for services. It’s wrong, but it happens.
The 1099 receipient can request the payee to issue a corrected 1099 – I’ve never bothered when I get those. I just go ahead and include it on my Schedule C.
My self employed kid gets a lot of 1099 forms each year. As @calmom noted…some are very accurate, and some aren’t… but the bottom line is…it’s still self employment income.
"@ Tanbiko Other than commuting costs, I have no expenses. Those aren’t deductible. "
My kids were also 17 at some point so I still remember…
You are an independent contractor. Your home base is your house. The lab is your client. You are not commuting because you are not an employee.
Did you read their email on your home computer/cell phone?
Did your valuable handbag experience wear and tear?
Computer, cell phone, home office. Even it is technically “deductible” just don’t do it. Just don’t. Bad idea to start your adulthood with an IRS audit.
Researching directly under a person who directs what to do and/or how to do it SHOULDN’T be considered self-employment. Apparently it is, but that doesn’t quite make sense.
From a document provided to us (we are called interns):
By that statement, I’d say it’s a scholarship. Certainly doesn’t sound like employment.
So a couple of things. First, don’t take tax advice on an internet chat board.
You won’t pay any income tax on this amount as it is well under your standard deduction.
So the question becomes self-employment tax (FICA). It sounds like non-employee compensation and I don’t know if there is an exception for “stipends” or such, so you’ll get hit with FICA. But on the plus side, you’ll get credit for it in the SS system and probably get it back when you old.
As for the accountant, not sure what the problem is but if your parents accountant charges you for advice on this simple question, he/she should be fired. A quick phone call should be all that is necessary. The amounts are so low, it isn’t worth messing around with too much.
If you school has accounting and tax program, hit up the professor or students for advice. I’ll bet they talk about it since many students are affected. Good luck.
If you are not an employee, then driving from your home to the place where you are working is not “commuting”. It is only commuting if you are going from your home to the location of an employer. If you are not an employee, then the company that hired is you is not an employer – it is a “client”, and traving from home to perform non-employee services for a client is a deductible expense.
You need records to substantiate your commute but they don’t have to be in the form of a contemporaneous log. You can reconstruct the information from a calendar & by calculating mileage – so if you were working 5 days per week and Google maps tells you that the distance on the route you took was 6 miles, that would be a 12 mile round trip each day, or 60 miles per week. Standard mileage is 53.5 cents per mile, or $32.10 for each 5-day week that you worked.
@calmom when running my scenario through TurboTax, it wouldn’t let me deduct anything because I do not own the car - it’s my parents’. It is 27 miles each day, 9 days per 2 weeks for 10 weeks. It takes off about $90 of the SE tax. I can’t find an IRS publication saying that I can deduct those costs, though.
I think you need to own the car to deduct based on standard mileage-- but when you were driving your parents’ car to get to the lab, who was paying for gas? That would be harder to reconstruct, but the point is that you legally can deduct out-of-pocket costs that you paid in connection with your the work.
Just a quick reminder that there might be actions to take in the rest of 2018 that will help lower taxes, especially if itemized deductions might run close to the new standard deductions. For us, it was going to depend a lot on medical/dental expenses and the AGI. It’s possible paying the second property tax early could take our itemized over standard for 2018 even with the new limits. I’ll be doing some calculations in mid-December to make that call. And under California law, itemizing deductions might be better for state taxes even if not better for Federal taxes so might do it differently for the two returns.
There were a number of actions we all took late last year that made a substantial difference in 2017 taxes. This won’t be anywhere close to that, but still might help save a few dollars in 2018 taxes.
To follow up on @Marilyn’s comment…the threshold for deducting medical expenses is 7.5% again this year for all ages, as it was last year. Prior to that, the 7.5% threshold was only for those 65 & over, AFAIK. I believe it will rest to 10% of AGI for all ages in 2019.
When determining if your itemized deductions will exceed the $24k standard deduction (MFJ), remember to consider the $10k limit on deductible state and local taxes (mainly state income taxes, real estate taxes).
