Income?

[Super Mom]

I have a client asking me if her son (the grandson) received income from the now dead grandfather who paid the son to do work but has no business. She wants to know if he can report the income, I'm thinking earned income credit, she wants to know if she needs to get something signed from the grandmother?? is this just a gift?? I already told her that any income would probably cause the son the pay SE tax, that's OK. What should I do?

Thanks in advance for any help!!!!!!!!

[Koss]

Grandson

The taxpayer in question--the grandson--probably won't qualify for EIC.

You didn't provide a lot of detail, but the kid is probably...

(i) under age 25 without a qualifying child, or
(ii) a qualifying child of someone else.

So, you're right, of course, that reporting the income will probably have no benefit, and may well trigger self-employment tax.

I would take this as an opportunity to educate the client.

Tell the client that her son doesn't need anything signed by Grandma. Whether Grandma signs anything or not, he has an obligation to report all the income that he earned.

Get the fee up front (LOL), and then prepare the return.

Then you present the return, and explain the balance due.

The client may try to argue that "it doesn't even make sense to file it, if he's going to have to pay," but then you can explain that he doesn't have a choice. Not filing the return would be a violation of federal law.

Maybe she'll feel better after you explain that there IS one small benefit to filing the return and paying the tax due...

Since her son has earned income, he can make a contribution to a Roth IRA.

LMAO

BMK

[taxmom34]

how old is son? i pay my grandson $10 every two weeks to mow the lawn and if he does other tasks for me i pay accordingly. but he's not going to file a tax return, he's 14 years old.

[Burke]

Age has nothing to do with it. See filing requirements for single person and gross/earned income.