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May 4, 2022
Question

I am a college student with only $2295 in income and it shows I owe $324. Didn't think I earned enough to be taxed. Is there a minimum income level before being taxed?

  • May 4, 2022
  • 3 replies
  • 0 views
I am claimed as a dependent on my parents taxes

3 replies

Employee
May 4, 2022

What was the source of the income?   Did you work as an independent contractor?   Was the income on a 1099NEC?    Or on a W-2?

**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**
Hal_Al
Employee
May 4, 2022

Q.  Is there a minimum income level before being taxed?

A. Yes, but it depends on the source of the income. Taxation starts at:

1.  Wages, salaries, taxable scholarship at  $12,550 (2021)

2. Unearned income (interest, dividends, capital gains, unemployment, taxable portion of 529 distribution) at $1100.

3. Household employee income (e.g. baby sitting, lawn mowing) over $2300 ($12,550 if under age 18)

4. Other self employment income over $432, including money on a form 1099-NEC. Income tax doesn't start until $12,550, but self employment tax* [equivalent to FICA for employees] starts at $432**. 

 

Yours is almost certainly #4, since $324 is exactly the amount of self employment tax due on $2295.  Note that the tax appears in line 23 of form 1040, not line 16.

 

*Although it may be news to you that you “have a business” (and most of the other people who get their first 1099); The IRS considers anything on a form 1099-NEC to be self employment income.  "Self employment tax" is how the self employed pay social security and Medicare tax. 

 

**The official reporting requirement is $400, but the calculation works out at $432. 

Employee
May 4, 2022

Yes, that calculation seems to be about the right amount for $2295 of self-employment income.

State filing requirements may be different.

Employee
May 4, 2022

You may not owe income tax, but you may owe self-employment tax (which is the equivalent of social security and medicare that regular employees have deducted).  The SE tax threshold is $400 of net profit from self-employment (gross income minus expenses).

 

If you are self-employed you will have a schedule C schedule SE which calculates the SE tax.