It’s a fact of the taxpaying life: Once you earn a certain amount of money, the IRS wants you to report it and pay taxes on it. That’s true for you, and that’s true for your child too.
So, what kind of money are we talking about, how much counts, and on whose return should it be reported?
When Does a Child Have to File a Return?
Your child must file a return in any of the following situations for tax year 2019:
- Unearned income was more than $1,100.
- Earned income was more than $12,200.
- Gross income was more than the larger of:
- $1,100 or,
- Earned income (up to $11,850) plus $350.
- The child owes any taxes, including Social Security and Medicare taxes.
Higher amounts are used if the child is blind.
Even if your child may not have to file a return, it makes sense to do so in some situations:
- Income tax was withheld.
- The child qualifies for a refund. A common reason is qualifying for the American Opportunity Credit or another refundable credit.
Earned vs. Unearned Income
If it’s unearned, that means you don’t owe taxes on it, right? Not quite.
- Earned income means it was earned from jobs or self-employment. This is where pay from mowing lawns, babysitting, waiting tables and the like fits in.
- Unearned income is interest from investments or other account holdings.
Either way, once your child reaches certain amounts, he or she becomes a taxpayer, and must file a return.
About Exemptions and Children’s Returns
It’s important to communicate and work with your child to make sure your child gets the dependency declaration right on their tax return. In order for you to be able to claim your child on your taxes, your child has to declare that they are a dependent on theirs. On 1040.com, the dependent question is on the Name & Address screen. A mistake here can cause your own return to be rejected, costing you time and effort to amend your child’s return to get it right.
While we’re on the subject, your child also shouldn’t claim an exemption on Form W-4, the withholding certificate every employer asks for.
Who’s Responsible for Filing a Child’s Return?
If able to file, your child is responsible for filing his or her own return and for paying any tax, penalties and interest.
BUT: If your child is too young or can’t meet these responsibilities for any other reason, you are responsible for filing on your child's behalf.