Question

Sam pays his 19-year-old son, Joshua, $550 per month to maintain the lawn and garden at the family residence. Is Sam subject to the household employment tax rules for Joshua? Why or why not?
Justin Case, a single taxpayer, paid mortgage interest of $2,579, paid real estate taxes of $1,751, and gave $3,750 to United Family Church, for which he received a contribution statement. What type of return is generally prepared based on this information?
Warren has self-employment income of $27,641. He had unreimbursed educator expenses of $250, and student loan interest of $2,467. These entries will be reported on __________.

Answer 1

1. Sam is not subject to household employment tax rules for wages paid to his 19-year old son Joshua for maintenance of his house's lawn and garden because he does not have to count wages paid to his son as per IRS tax guide publication 926 (2020), "Don't count wages you pay to :

a. Your spouse

b. Your child under the age of 21

c. Your parent (exception exists)

d. Any employee under the age of 18 at any time in 2020 (exception exists)"

2. Mortgage interest paid, real estate taxes paid, contribution to Church are all part of itemized deductions allowed in IRS Schedule A. Schedule A is a tax form where the tax payer can claim itemized deductions for certain personal expenses and charitable contributions, instead of standard deduction. Schedule A is filed in addition to standard Form 1040 for filing annual tax returns, if the tax payer wishes to claim itemized deductions. So, in the above scenario, since all three are allowed as itemized deductions, the tax payer is likely to file Schedule A.

3. Self-employment income will be reported on Form 1040(Schedule C)

Unreimbursed educator expenses are reported on line 23 of Form 1040.

Student loan interest is reported on Form 1098-E