Other Income not being added to Earned Income in calculating standard deduction for dependent
Our son(19yo in college, dependent), has total income of about $6000, which includes some W-2(~$2500) and some miscellaneous/other income(~$1800), and div/CG(~$2000) from a mutual fund. As a dependent, his standard deduction should be calculated as his earned income plus $450(so about $4350). But FreeTaxUSA is not adding the other income to this calculation. It seems like a bug in the software, but I don't want to pay for the deluxe version to chat with someone about their problem. Have any of you experienced this? Or am I missing something?
Answers
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Did you identify the other income as earned income? If it was on a 1099-MISC, it might not be earned income. Did it get transferred to a Schedule C as a business? If not, what kind of income was it?
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It was a 1099-NEC. He loves to play volleyball, so he refereed a volleyball tournament last year. The income is from that. Since it was a one-time thing, we didn't think we needed to declare it as a business and file schedule C. So we just added it to his tax form as miscellaneous income. According to the 1040 instructions on the irs website, all of those additional income categories should be added to calculate the earned income.
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It was a 1099-NEC. He loves to play volleyball, so he refereed a volleyball tournament last year. The income is from that. Since it was a one-time thing, we didn't think we needed to declare it as a business and file schedule C. So we just added it to his tax form as miscellaneous income. According to the 1040 instructions on the irs website, all of those additional income categories should be added to calculate the earned income.
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@Torgesen
1099-NEC income is considered self-employment income and does need to be reported on Schedule C."Other Income" isn't considered earned income by the IRS, but Schedule C income is.
If you have additional questions that are specific to the account, you can always contact Support from within your account. You do not need to upgrade to send a message to receive help.
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I am having a similar issue. I worked with a non-profit as a volunteer with a living stipend. I put this into my other income section because it was NOT self-employment, despite that they gave me a 1099 NEC. FreetaxUSA now is only showing my standard deduction as 1350, when i know my earned income plus 450 is more than that because this other income WAS earned ( I was an employee, had to go to staff meetings etc). Any tips?
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Hello Sageyh:
For purposes of the standard deduction, and tax credits too, earned income consists of W-2 wages, salaries or tips, and net earnings from self-employment. Income reported as “other income” is not included in the category of earned income and thus, your standard deduction will not change after you report the income as other income.
If you have not already done so, you might consider entering your Form 1099-NEC in the section Business Income (Schedule C). Assuming you have a net profit—that is, your expenses do not exceed your income—you will then have earned income and you may then see a positive change in your standard deduction.
Entering your Form 1099-NEC as business income will subject to you to not only income tax, but also, self-employment tax. While a higher standard deduction may offset any income tax owed, you may still be subject to self-employment tax as it is a separate tax from the income tax, and will apply in your situation assuming your net income from your business is $400 or more.0
