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Category: Tax
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Experience:  over 40 years experience in tax matters
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To Megan - you stated that if my dependent earned less

Customer Question

To Megan - you stated that if my dependent earned less than $400 or less NET they don't need to file but an enrolled agent disagrees. 1099Misc i treated differently. If the amount in box 7 is more than $400, the dependent needs to file tax return (1040 + Schedule C) regardless of net profit or loss.Who is right?

From emc011075

Sunday, March 20, 2016 5:01 PM EST

1099misc was your dependent received was also mailed to IRS. So unless he files return and tell the IRS about his expenses, IRS will assume that he didn't have any. IRS need to prove income but it is up to the taxpayer to prove the expenses. If his 1099Misc show more than $400 and doesn't file a return, he will get a letter from IRS. IRS will NOT assume that he had any expenses. That's the taxpayer's job.

Your response?  Megan justanswer said you must answer this so I can get the right information.

Submitted: 1 year ago.
Category: Tax
Expert:  CGCPA replied 1 year ago.

The enrolled agent advised you correctly but please understand that sometimes the difference is not in the understanding of the advisor but in the way their words are understood. So, rather than belabor the point here is my explanation. If you have any questions please feel free to ask.

A dependent with a W-2 need not file if thier wage income is below the $4000 mark. However, if taxes ((FFederal or State Income Taxes) were withheld they should consider filing to get the withheld amounts refunded.

A dependent (or anyone else) who is self employed and receives a 1099-Misc for $400 or more must file. This is because the IRS does not know if a profit was made and only knows about the 1099 form. Without a return the IRS will compute taxes (the SE Tax is not subject to exemptions and itemized/standard deductions) based solely on the 1099-Misc. They will then bill the person with interest and penalty added to the tax.

A 1099-Misc could be mailed to the person and not be received.

Therefore, a self employed person should always file if they have any business receipts totaling over $400 and employed (W-2) recipients should file if they have income over $4000 or reefundable withholdings.

Customer: replied 1 year ago.

I'm sorry but only Megan was supposed to answer per customer service because they thought they deleted this question as it was reposted and I can only rate one person which I did on the duplicate question.

Expert:  CGCPA replied 1 year ago.

No problem.