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How can one owe the IRS when total income is below minimum threshold?

My daughter had $2000 in babysitting income that required a schedule C.

My daughter’s total income was less than $13850 when adding her W2 income to the babysitting income.

We used Turbo Tax to see what we thought would be a refund amount but instead Turbo Tax says we owe $213.

Why wouldn’t Turbo Tax advise that we would be better off not to file since we made less than $13850?

Best answer by MinhT1

Child care (or babysitting) income is considered by the IRS as self-employed income.

Your daughter is required to file a tax return when self-employed income exceeds $400. The limit of $13,850 is for wages on a form W-2.

Self-employed income is subject to income tax and self-employment tax which is calculated at 15.3% on 92.35% of the net self-employed income.

Your daughter pays only self-employment tax as her income is below the standard deduction.

Child care (or babysitting) income is considered by the IRS as self-employed income.

Your daughter is required to file a tax return when self-employed income exceeds $400. The limit of $13,850 is for wages on a form W-2.

Self-employed income is subject to income tax and self-employment tax which is calculated at 15.3% on 92.35% of the net self-employed income.

Your daughter pays only self-employment tax as her income is below the standard deduction.

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bt001Author

$13850 limit is for W2 only.
Got it.
Thanks @MinhT1

1 reply