Question

Does our child need to file her own taxes?

Forum|Forum|4 years ago
March 30, 2022
1 reply
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Our 16 year old daughter is our dependent. She made $8900 of income in 2021 by cashing out tokens she earned in RecRoom (a virtual reality, online video game). She is very artistic so she has been able to make a lot of 3-D inventions and rooms that people purchase in-game from her. She treats her RecRoom activity as a hobby and she does it mostly for fun and not for the money (she is currently a full time high school student). She received a 1099-SEC from RecRoom for her $8900 earnings (this is her ONLY income). I am confused as to whether or not she needs to file her own taxes. From what I read, money earned as a hobby is never considered "earned income" and if your gross income is less than $12,550 then you do not need to file taxes. HOWEVER, I also read that 1099-SEC is usually seen as "self-employment" income by the IRS and I believe that the IRS will expect you to file if you make >$400 in self-employment income. How do I answer the question in TurboTax "Is your child required to file?"

ColeenD3

Yes, she must file and it is taxable, regardless of how you treat it.

If it is a hobby, then she has unearned income. She must file Form 8615 and she can't take expenses. Hobby income is reported

To enter hobby income and please follow these steps:

Sign in to your TurboTax account
Click on Federal Taxes tab
Choose Wages and Income
Scroll down to Less Common Income and click Start to to right of Miscellaneous Income, 1099-A, 1099-C
Click Start to right of Hobby income

If it is self-employment, she is over the $400 threshold.

Follow these steps to go to the Schedule C section of your return:

On the top right corner of TurboTax online screen, click on Search (or for CD/downloaded TurboTax locate the search box in the upper right corner).

Type in “schedule c” (or for CD/downloaded TurboTax, click Find).
Click on “Jump to schedule c”.
Click on the blue “Jump to schedule c” link

Many people are engaged in hobby activities that are also a source of income. For example, some people started selling handmade items during the pandemic. These people must report this income on their tax return.

A hobby is any activity that a person pursues because they enjoy it and with no intention of making a profit. This differs from those that operate a business with the intention of making a profit.

In determining whether their activity is a business or hobby, taxpayers must consider nine factors. Hobby

T

tryoderAuthor

Thank you for your response. I have begun working on my daughter's own tax form. I do believe that her income qualifies as hobby income per IRS definition (I looked at the IRS website to help make this determination). My new question is...since she received a 1099-NEC from RecRoom (the company that runs the virtual reality game). Would it be best to enter the amount she earned under the "Income from form 1099-NEC" and flag this as an uncommon situation by clicking on "This is not money earned as an employee or self-employed individual, it is from a sporadic activity or hobby."? Or should I do as you originally suggested and just enter it under the "Less Common Income, Miscellaneous Income, Hobby income." If I enter it in both locations (1099-NEC and Less Common Income), this seems to create duplication (?) Thanks.

P

PattiF

You do not need to enter this in both locations since you are classifying this as hobby income. Only enter this as Less Common Income to avoid duplication of income.

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