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Old 12-10-2014, 05:40 PM
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compensation to minors

My 12-year-old is participating in a clinical trial and the compensation is $750. Now that she's finishing up, they want to cut a check, but I filled out a w-9 in her name, because if they pay me, one third of the money will disappear because of my tax bracket. They said they aren't sure if they can pay her directly, but I can't see why not. Kids are paid for various things all the time, and quite frankly, she's the one who's using the medicine, making the visits (usually without me), getting blood tests, etc., and I'm not doing anything. Almost seems fraudulent to pay me, since I'm not the one enrolled. Do I have any ammunition to use in order to convince them that they can, and should, make out the check to her? I really want her to get the entire sum of compensation. Thanks



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Old 12-10-2014, 08:52 PM
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Originally Posted by tvjo View Post
My 12-year-old is participating in a clinical trial and the compensation is $750. Now that she's finishing up, they want to cut a check, but I filled out a w-9 in her name, because if they pay me, one third of the money will disappear because of my tax bracket. They said they aren't sure if they can pay her directly, but I can't see why not. Kids are paid for various things all the time, and quite frankly, she's the one who's using the medicine, making the visits (usually without me), getting blood tests, etc., and I'm not doing anything. Almost seems fraudulent to pay me, since I'm not the one enrolled. Do I have any ammunition to use in order to convince them that they can, and should, make out the check to her? I really want her to get the entire sum of compensation. Thanks
They need to directly pay the compensation of $750 to the minor child as you filed w9 in her name , then the minor child needs to report the income on her Sch C of 1040 as a self employer and they also need to submit a copy of 1099/1096 for the compensation to the IRS/state; minor child claimed as a dependent on your tax return must file her own taxes if her Self employment net earnings are greater than $400.also aslongas the amount on Sch SE line 2/3 is also $400 or exceeds $400, then she needs to pay her self employment ax;however, she deducts 50% of her self employment tax paid to IRS. If the child is filing as a sole proprietor and/or a self-employed individual, she generally has to make estimated tax payments if she expects to owe tax of $1k or more when she files her return.also you actually can not include the minor’s compensation on your return since the compensation of $750 is the minor’s earned income, not her unearned income,i.e. interest or dividend or capital gain.what I mean is that IF your minor is under age 19, and her income is less than $9,500 and only from interest and dividends,then, it can be attached to your return using Form 8814. However, as there is any income from a part time job, earned income you cannot attach her income to your tax return. OR if interest plus dividends plus other investment income total more than $1,900, part of your minor's income will be taxed at the parent's tax rate instead of the child tax rate but in your case this rule doesn’t apply since the child’s income is only earned income and there is no unearned income.



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Old 12-10-2014, 09:39 PM
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Thanks. A little confused - so if she is only going to earn that $750 for the year, will she have to pay any taxes on it? And if I file a separate return for her to reflect this income, will I still be able to claim her as a dependent on my own tax return?



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Old 12-11-2014, 01:20 PM
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Originally Posted by tvjo View Post

#1: so if she is only going to earn that $750 for the year, will she have to pay any taxes on it?

#2;And if I file a separate return for her to reflect this income, will I still be able to claim her as a dependent on my own tax return?
#1;it depends ;yes UNLESS expenses exceed her self employer income of $750. REMEMBER; the amount on Sch C line / 31 is $400 or exceeds $400 , then she must file her return and also the amount on Sch SE line 2/ 3 also is $400 or exceeds $400 then she MUST pay self employment tax of 15.3% and she can dedcut half of her seca tax on line 27 of 1040.

#2;yes;however, as mentioned above, she still needs to file her return as a dependent aslongas she hasMore than $400 in self-employment income.so,you can still claim her if all the requirements are met, even if she files her own return.in this case , she can not claim her own personal exemption since she is your dependent.



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