If a kid is old enough to work, a kid is old enough to file a required tax return. Babies even file tax returns. There is no lower age limit.
Every year on this website at least once, some kid mentions how she wrote a college application essay about her self-employment job (tutoring, piano lessons, apartment cleaning, golf caddying, summer nanny)- - how it taught her values, and organizational skills, etc, etc,; but then turns around and lets slip that the money earned from this job was not reported on her tax return. Apparently the job did not teach her to avoid failure to file penalties. I think it’s a red flag especially for need-based scholarships where clearly the applicant has a job, yet no tax return was filed.
Last cycle there was a mom whose son was applying for the Evans Scholars program (golf caddy) which is need based. Both she and her son needed to complete financial/tax information for the application, including CSS profile. On CC, she learned (since it apparently wasn’t obvious) that because of the few thousand he earned in summer caddying, including tips, he needed to file a tax return, including Schedule C, so she and her son quickly took care of his tax return filing. Later she reported back that he was fortunate to be named an Evans Scholars at his school of choice. I believe that the scholarship selection committee would find it quite odd that a kid applying for this scholarship did not file a tax return. It says something about character. In fact for this scholarship, one of the requirements is that the applicant demonstrate outstanding character and integrity.
If this Questbridge applicant earned more than $400 cleaning apartments in 2015, she is required to file a tax return to report her self-employment income. Whether her parents get EIC has no effect on the amount of self-employment tax she owes on her own cleaning income.
There are many, many people who do not understand how the tax system works. It’s not necessarily a character flaw.
In my years of poking around in others’ business as part of my job in finaid, I have found that folks who earn very little often do not understand taxes … and the folks they pay to assist them in filing are often either not asking the right questions or providing bad advice. One of the biggest issues I had was untaxed income. Students and parents were honest and put it on the FAFSA … but they did not understand that it doesn’t take much untaxed income to require filing a tax return. I had to give the dreaded ultimatum: File for the prior year or no aid. It is not easy to be the heavy, but as soon as I saw untaxed income greater than the filing requirement, I was bound by regulations to be the hard-a**.
So, OP … I will assume everything will be by the books for 2015 (the year in question for 16-17 FAFSA). You may end up with a 0 EFC simply due to your parent’s low income. In that case, you won’t need to tell anyone anything about your situation … 0 is as low as it goes. If the EFC is greater than 0, you can request a professional judgment review of your situation. No PJ’s will be done this early, though.
Focusing strictly on your question about untaxed income, as others have said, what you are doing is considered self employment and is taxable income and is supposed to be self reported on an income tax return as such. I do not expect you to know that, and I don’t necessarily expect your mother to know that. The majority of the population uses a tax preparer and knows nothing about tax law. If your mother mentions it to her tax preparer if the tax preparer is ethical he will explain that it is taxable income. If your mother uses online software and reads all of the questions and answers them honestly the software will also include the cleaning as income.
That aside, there must be some other sources of income in addition to your mother’s 20k job and 1k in cleaning for you not to even be receiving free lunch?
I’m going to be a little pedantic here. Babies don’t file tax returns. Parents of babies do in their name. And those parents have accountants who do the real work. Yes, students who make money on jobs should file tax returns.
What about her own EIC? no kids limit is $500 ish? OP might get a partial to offset, (The FICA on $1000 is negligible.)
Filing for EIC is complicated and produces one of the highest “mistake” rates in the 1040 population…it’s not rocket science, but it’s not easy at all. In fact, many who qualify don’t even file for it!
So I talked to my mom (sorry for the late response), and yes, she DID file. SHE DID FILE FOR THE EXTRA INCOME. I was mistaken and thought she didn’t due to how low it was. Again, I don’t know much about tax, so sorry for wasting people’s time. In other words, yes we did pay tax on everything, so there’s no “untaxed” stuff. To be honest, I felt really personally hurt that I was called names. I am NOT THAT. I worked HARD. So sorry everyone!
If your mom has to file schedule C because of the self employment income, she won’t be able to file 1040A, one of the requirements of auto-zero-EFC. So someone suggested you sign up for free/reduced lunch at high school if you qualify.
At that income level the OP will receive a refund through the earned income tax credit. Loss of assets due to disasters is also considered as a deduction, I doubt that it will make much of a difference. Since the records are lost the OP can estimate.