Misc 1099 $3500 other income in 2007, dependent and did not file a Tax return.?

Question

I was filed as a dependent with my parents in the 2007 so I was under the impression I did not need to file a Tax return.

But after digging through my old papers I found the 1099 misc, it is about $3500 dollars in prize money toward myself I completely forgot about this and it was not part of my parents Tax return and I did not file one.

I know I messed up, but what are the things I need to do now to resolve this and what are the penalties?

Answer 1

Just file!

you owe under $300 to the IRS and depending on your state you may owe state tax (CA about $26).

you will also have to pay a penalty and interest.

Get this done tomorrow. So its over with.

Answer 2

You cannot add this to your parents return, you'll need to file your own return.  Yes, you'll have a tax liability and how much that is depends upon whether you have any other taxable income......ie, wages, interest, etc.....

You'll be charged interest on a daily basis from the date the tax liability should have been paid (4-15-08) till the date the IRS receives it (current interest rate charged is 5%).

You'll also be charged 2 different penalties.  A late filing penalty of 5% per month or part of month that your tax return is filed late, up to 25% of the tax liability due.  The other penalty you'll be charged is a late payment penalty, which is 1/2% per month up to 25% of the unpaid amount due.

The bottom line is that yes, you need to file and you need to do so ASAP, to stop at least the late filing penalty from growing any larger.  Also, you can still efile your tax return online on your own or thru a tax preparation company.

Furthermore, you may very well have to file a state return and depending upon where you're located, a local tax return.

Answer 3

Bostonian is the only correct answer so far.  If the 1099-misc was for working, the $3500 would be in the box for non-employee compensation, and your filing limit would be $400 and yes, you'd have to file and would owe self-employment tax.  But since you say it's prize money, there is no self employment tax due on it, and you are below the $5350 limit to have to file for 2007 unless you have additional income you didn't mention.  You haven't messed up, and you don't need to do anything.

Answer 4

If that's your only income for 2007 there is no need to file.  The filing requirement amount in your case was $5,350 and you are below that.

At least a couple of the above posters should know better, especially the self-proclaimed "Master Tax Advisor and Enrolled Agent!"  That's a rather shocking oversight on her part!

Answer 5

I'm afraid the other posters haven't got things quite correct, either.

IF you are under 18 (or under 24, if a full time student in 5 months of 2007), or if your total income is less than $3400, your parents could properly claim you has a dependent, and you can only claim $850 as your standard deduction as a dependent, so you DO have to file and pay income taxes of approximately $265, plus interest and penalties.   DO IT NOW.  The interest and penalties will add up.

If not, this income means you could not be taken as a dependent, YOU do not need to file a tax return, and they DO need to file an amended tax return not claiming you as a dependent.

Grumble.  "v b" beat me to it by 4 minutes, while I was researching the numbers.

You'll receive a bill for the penalties and interest.   There's no further penalty or interest if you pay that bill within 30 days of the day it was sent.

Answer 6

Actually our prime tax preparers got this one wrong.

If the 1099-Misc has the $3500 in box 3 (prize money), this is not earned income.  Therefore, even if this is the dependent's ONLY income, the dependent's standard deduction won't cover it.  As unearned income, he only gets an $850 exclusion.  Thus he would owe about $265.

If it's prize money and he had, say, a $1000 in wages, the standard deduction would be higher, but only about $1300, since you only get $300 for unearned income.  At that, he'd owe about $320 in additional tax.

If it's not prize money, but the dreaded box 7 (SE income), the SE tax would be $495...If the rest of the income was $5350 or less, he wouldn't owe income tax.

Answer 7

Please make sure that you include all income on the return that you are going to file.  The IRS often takes 2 to 3 years to contact you to let you know that some income was missing.  (This helps to kick up those penalties and extra late fees don't you know).  Oftentimes, people assume that the IRS doesn't know about the income simply because the IRS hasn't contacted them.  Believe me, they DO know.

Although your parents claimed you as a dependent, they more than likely did not pick up any of your income. Since they filed you as a dependent, it simply means that you will not be able to take a deduction for yourself (i.e. the tax on your individual return is higher than if you were able to claim yourself).  

You may e-file your federal return for free at this link -->http://www.irs.gov/efile/article/0,,id=1...

Hope this helps.

Good luck to you.