So, your son earned some money at a cool summer job last year. Now that tax season has rolled around, you may be wondering if you need to file a tax return for his income. The answer is…maybe. Here are a few questions to consider about filing tax returns for children.
Is Your Child Considered a Dependent?
First, make sure that your child is still considered a “dependent” in the eyes of the IRS. Otherwise, they’ll be considered an adult taxpayer and be required to file a return accordingly. The requirements to be considered a dependent are as follows:
- Must reside with you more than 50% of the year. (One exception is for students who reside at school most of the year – they can still be considered dependents.)
- Must not provide more than 50% of his/her own financial support.
- Must be under 19 years of age or a full-time student under the age of 24.
What Type of Income Did your Child Earn?
The IRS treats income and investments differently for children. There are essentially two types of incomes for children that need to be considered:
- Earned Income – This refers to money your child earned that was paid by an employer.
- Unearned Income – This refers to income from dividend payments, interest, or investment income.
How Much Money Can My Child Earn without Paying Taxes?
The threshold for earnings works out like this:
- Earned Income – If your child earned more than $6350 in 2017, the child must file a tax return. However, even if your child earned less than $6350, they may want to file a return as they might be entitled to a refund.
- Unearned Income – If your child earned more than $1050 from interest, dividends, or investments, the child must file a return. (Note, if your child’s unearned income totals more than $2,100, kiddie tax rules apply.)
- Earned Income Plus Unearned Income – If your child made money from both earned and unearned income, the calculations become more complicated and the thresholds change. It is probably best to contact a tax professional for advice about this situation.
Should I Just Include my Child’s Investment Income on My Tax Return?
If your child made less than $10,500 from interest, dividends, and investments, made no payments, and had no tax withheld, you could include their earnings on your own tax return. But be careful, as doing so may put you in a higher tax bracket and increase the amount you owe.
Who Should Fill Out the Child’s Tax Return?
If your child is old enough, you should have them fill out their own return, as it is a good time to learn how to handle this responsibility. If your child is not old enough, you can fill it out and even sign it, but note that you are signing as the parent or guardian.
Any Common Mistakes to Avoid on a Child’s Tax Return?
It is VERY IMPORTANT to check the box that says that he or she can be claimed as a dependent on someone else’s tax return. Ignoring or misunderstanding this box is a common error that could delay the processing of your taxes.