When Does Your Child Need to File Income Tax?

Parents in Milford, NH Have Questions

A rite of passage for any working teen is the filing of their first income tax.  A status as a dependent does not exempt your child from filing income taxes.  If the child’s earned income reaches $12,200 or unearned income, from investment interest, above $1,100.  For those that are self-employed generating income, if the net earnings exceed $400 an income tax return must be filed. 

Milford parents were pleased that their teen had found a part-time job to generate some spending money.  Unclear on how their teen would be taxed, they contacted Merrimack Tax Associates with questions.

Times That Your Child May Want to File a Federal Income Tax Return

Even if your child does not fall into the category of requiring a federal income tax return to be filed, there are circumstances when you may want to regardless.  If their employer has been withholding income tax, filing a return will make them eligible for a refund.   While some employers automatically withhold income tax from paychecks, minor children are not expected to pay this.  Filing a tax return for your child, using Form 1040EZ, will allow them to recover this money that was taken out of their paycheck.             

For employment that has amounted to substantial gross income, your child may be eligible to begin earning work credits to future Social Security and Medicare benefits.  The earned income must exceed $1,360 to qualify for these credits and children can earn a maximum of four credits each year.

Reporting Your Child’s Income on Your Tax Return

Children under age 19 whose income is less than $11,000 can have their income reported on the parent’s tax return.  This allows any federal tax that was withheld to be returned but it may affect your tax bracket, with the additional income.  To report this income on your own tax return, you would need to submit Form 8814.

There are many factors that affect how and when your child’s federal tax return will be filed.  The Milford parents were able to get a better understanding of how this income would affect their child’s future tax bill and now have a plan in place going forward.