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?
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?
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.**
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.
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.