I completely misunderstood this. Kid earned $500 but we moved $1000 into his Roth IRA account. Schwab gave $100 bonus also. How do we fix this now?
Thanks
You contributed $1000 for 2020?
Option 1: donāt worry about it, your chances of the IRS asking about it are very small. ETA: Though if you filled a tax return saying he earned $500 maybe you donāt want to take that risk.
Option 2: Call Schwab and ask if itās too late to change $500 to a 2021 contribution. I think you can do so before the tax return filling deadline, which is TOMORROW MAY 17th, so do it today. Just make sure he heāll have the income in 2021.
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Completely NOT the correct way to do it. But adding a bit over $500 self employment income on his return will eliminate the overcontribution issue and will most likely never be questioned - essentially back-date doverās suggestion #2 (his original suggestion #2, about paying your kid). Of course, itāll increase his income tax due, too.
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I thought about adding this as option 3, but I assumed they were 2020 contributions and heād already filed a 2020 return, so I wasnāt sure itād be worth the effort.
Thanks for the information Dover. We didnāt file tax returns yet. We have until June 15th to file taxes in TX. Schwab gave $100 bonus with $1000 contribution.They might have reported it to IRA.
I can go with option 1 if chances are very less.
Regarding option2, he earned $300 so far in 2021. He will earn another $200 during fall season. He will have $500 earning for the year of 2021. I can go with option 2 as well.
Do we need to include his income in our tax filing? Do we need to file separate tax return for him? I am going to tax consultant to file taxes. I will take his IRA form if available on Schwab.
Hi,
Do i need to file a return for him? We are claiming him as our dependent.
Not required. But Iād at least prepare one anyways, just to have on hand as a reminder in case the IRS does ask about the $1k IRA contribution at some point.
If you go to a tax preparer, and tell them he earned $500 and made a $1k IRA contribution, that is how his return will be prepared. As I said, adding some extra income is not the proper way to fix your problem, and no preparer will do that for you (and if they do, itās an indication you should not be using them at all).
Bottom line is, if you leave the $1k contribution, he had $1k earned income. Period. Whether you file a return that says this or not. If he earned $500, you need to un-do part of the IRA contribution.
Never mind, I interpreted the articles incorrectly
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I think it is required, if he earned more than $400 on a 1099.
When a dependent (child or adult) may need to file a tax return
Taxpayers who are claimed as a dependent on someoneās tax return are subject to different IRS filing requirements, regardless of whether they are children or adults. A tax return is necessary when their earned income is more than their standard deduction.
The standard deduction for single dependents who are under age 65 and not blind is the greater of:
- $1,100 in 2020
- Or the sum of $350 + the personās earned income, up to the standard deduction for an unclaimed single taxpayer which is $12,400 in 2020.
A dependentās income can be āunearnedā when it comes from sources such as dividends and interest. When a dependentās unearned income is greater than $1,100 in 2020, the dependent must file a tax return.
https://www.thetaxinstitute.com/insights/tax-in-the-news/dependent-self-employment/
If he earned more than $400 on a 1099 heād owe self-employment taxes, which requires filing a return.
On the other hand, refereeing soccer could probably be considered a hobby and thus not subject to self-employment taxes. I donāt know enough about that determination to say.
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If itās hobby income, it isnt earned income and doesnt allow for a IRA contribution.
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Oh, good catch
Hi glitch99 and Dover,
We didnāt get any tax form for him. Nothing on Arbiter sports website to download. Am i doing it completely wrong. Just thinking of ignoring all issues and see what happens. I have few more weeks (Jun 15th) to file taxes.
Thanks
Hobbies in the tax world are usually in reference to someone claiming a hobby where they donāt make any money is actually a business and using that business loss as a loss on their taxes. If the small business never makes money and you arenāt running it like a business, the IRS will determine it is a hobby and all your losses werenāt actually business losses.
Working as an umpire or referee and getting paid for your labor is NOT a hobby. It is taxable earned income.
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Yeah Meed18 is right here.
Its not the taxpayer who declares itt as hobby income. You canāt just say your income is a hobby and not earned.
Hobby income is only such if the IRS says so. And thats not what you want. cause it only hurts you by disallowing your loses. Gains from hobbies are still taxed and thats not a hobby business.
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Can we still file extension. Jun 15th is last day to file taxes for TX.
My 5/24 has expired and I can start churning again. I work fulltime and have a family so I canāt really do the giftcard game. Online only. Last time I used Plastiq to pay my mortgage and that worked pretty well. I was wondering if there is anything better now. The doctor credit link has not been updated in a while. Thanks!
Which link? If youāre looking for CC signup bonuses, this DoC page gets updated. Plastiq got bought by another co recently and might still work, but I havenāt used it in years. For churning, I pay property and income taxes with CC fees in the 1.85-2.3% range vs Plastiqās 2.9%.
If youāre asking about mortgages in general and not for CC churning purposes, there are a few ways to pay mortgage with rewards debit cards, see the discussion here.
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Thanks for the reply. This is link I"m talking about. I used to use plastiq and pay my mortgage for churn. But a lot of cards donāt work for paying your mortgage using plastiq. Since itās been a few years I was hoping something better has come along. Good idea about paying my taxes using a churn credit card.