At What Age Do You Need to Begin Paying Federal Taxes?

Parents of Hollis, NH Teen Have Questions

For underaged children, filing a federal tax return is dependent on your income rather than your age. If
a minor child’s income exceeds $12,950 (for tax year 2022) they need to file a tax return. Any income
below this amount does not need to be claimed. If the teen is working for an employer, they will likely
automatically withhold taxes. To have this money refunded, a tax return will need to be filed for the
working minor. For those minors that are self-employed, if their income exceeds $400, they will need to
file a tax return. Self-employment taxes, including Social Security and Medicare contributions, will be
required on this self-employed income.

The parents of a Hollis teen were trying to get a better understanding of how their minor child would be
taxed on her part-time job. For advice, they contacted the team at Merrimack Tax Associates.

Minors Can Earn up to the Standard Tax Deduction without Owing Taxes

In 2022 the standard tax deduction for an individual was $12,950. A minor can earn up to this amount
without having to pay taxes or file a return. If their earned income exceeds $12,950, filing a federal tax
return is necessary and the amount of income beyond this standard deduction will be taxed accordingly.
It is important to note that if the underaged child is working for an employer, they are likely
automatically withholding taxes from their paycheck. To get this money back at the end of the year, a
tax return will need to be filed by the minor with the expectation of a refund for taxes paid on the first
$12,950 of earned income.

Tax Rules Regarding a Minor’s Unearned Income from Investments and Interest

Unearned income, from dividends or interest, that a child accrues during the year is not taxable up to
$1,150 in 2022. The same principle applies that if this unearned income is below the $1,150 threshold,
the minor does not need to file a federal tax return. However, for unearned income exceeding this
amount, a return will need to be filed and the money above this will be taxed accordingly.

The Hollis parents were pleased to hear that the money their daughter earned at her part-time job, well
below $12,950, would not be taxed and that they could file a tax return to have the employer
withholdings returned at the end of the year.