Today TaxMama hears from Mary in Ohio, who says, “I am 15 and have been working for the past 3 years. I have my own business (tutoring). What amount do you have to earn in order to pay taxes on it?”
Here’s the scoop. Legally, if you earn more than $400 in your own business, you need to report it.
At that point, you start having to pay self-employment (SE) taxes on all your profits. The rate is 15.3% of your profit.
You will owe that, even if your overall income is too low to have to pay income taxes.
You’re right to start asking about this. Talk to your folks and see if they can help you take care of your tax issues.
Most likely, if you’re any good as a tutor, you’re earning a lot more than $600. And if you’re smart,
you’re probably putting all that money into a bank account, to save up for college.
Which means, there’s an audit trail – or a trail of evidence showing you have that money.
I wouldn’t worry too much about getting into trouble at your age – but you may want to look at the amounts and see how significant they are getting to be. This may be time to start reporting your income – and to begin your adult financial life.
And remember, you can find answers to all kinds of questions about when to begin filing tax returns, and all kinds of other tax issues, free. Where? Where else? At TaxMama.com[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips. Please click on the subscribe link and join us.]
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