If My 16-Year-Old Works, Do They File Taxes?
Understand the tax responsibilities and benefits for working 16-year-olds. This guide clarifies when filing is necessary, how earnings are treated, and the steps to claim what's due.
Whether a 16-year-old needs to file a tax return depends on their income. Tax obligations can arise based on the amount and type of earnings received.
Determining if a 16-Year-Old Needs to File
A 16-year-old, considered a dependent for tax purposes, must file a federal income tax return if their income exceeds certain thresholds. For 2024, if a dependent’s earned income was more than $14,600, they must file. This threshold applies to wages, salaries, and tips.
If a 16-year-old has unearned income, such as from investments, the filing requirement is triggered if this income exceeds $1,300 for 2024. Unearned income includes taxable interest, ordinary dividends, capital gain distributions, and potentially unemployment compensation or trust distributions. For dependents with a combination of earned and unearned income, a tax return must be filed if their gross income surpasses the larger of $1,300, or their earned income plus $450.
Even if a 16-year-old’s income falls below these mandatory filing thresholds, filing a tax return can still be beneficial. If federal income tax was withheld from their paychecks, filing a return is the only way to receive a refund of any overpaid taxes. This ensures they reclaim money.
Understanding Different Types of Income
Income earned by a 16-year-old typically falls into two main categories: W-2 income and self-employment income. W-2 income, or employee wages, is money earned as an employee where an employer withholds taxes directly from each paycheck. Employers issue a Form W-2 by January 31st each year, detailing wages paid and taxes withheld, including federal income tax, Social Security, and Medicare.
Self-employment income, in contrast, comes from working for oneself as an independent contractor, freelancer, or through gig work, such as babysitting or lawn care. In these situations, the payer typically does not withhold taxes. If a 16-year-old has net earnings from self-employment of $400 or more, they are required to pay self-employment tax.
Self-employment tax covers Social Security and Medicare taxes. For 2024, the self-employment tax rate is 15.3%, comprising a 12.4% Social Security tax and a 2.9% Medicare tax. This tax is applied to 92.35% of the net earnings from self-employment. The Social Security portion of the tax applies to the first $168,600 of combined wages and net self-employment earnings for 2024, while the Medicare portion has no income limit.
How to File a Tax Return
Preparing a tax return for a 16-year-old involves gathering documents and selecting an appropriate filing method. For W-2 income, the Form W-2 from their employer summarizes earnings and withheld taxes. If the 16-year-old earned self-employment income, they might receive a Form 1099-NEC or Form 1099-MISC, though all income must be reported.
The main federal tax form for individuals is Form 1040. For self-employment income, Schedule C reports income and expenses, and Schedule SE calculates the self-employment tax owed. These schedules are then attached to Form 1040.
Tax returns can be prepared using various methods, including tax software, with assistance from a tax professional, or by filling out paper forms. The IRS Free File program offers free tax preparation software for taxpayers whose adjusted gross income is $84,000 or less for 2024. When filling out Form 1040 as a dependent, the individual will enter their personal information, report their income, and calculate their tax liability.
Claiming Refunds and Other Considerations
A 16-year-old filing a tax return can claim a refund. If their employer withheld federal income tax from their wages, and their total income was below the filing threshold or their calculated tax liability was zero, they are eligible for a refund. This often occurs because employers withhold taxes based on estimated annual income, which might be higher than actual earnings from a part-time or summer job.
Filing a return is the only way to recover these withheld funds, as the IRS does not automatically issue refunds without a filed return. For a dependent, the standard deduction is limited. For 2024, it is the greater of $1,300 or their earned income plus $450, but it cannot exceed the basic standard deduction for single filers, which is $14,600. This dependent standard deduction helps reduce their taxable income or can result in a refund if taxes were overpaid.
A 16-year-old’s income generally does not prevent their parents from claiming them as a dependent. Parents can claim a child as a dependent based on age, relationship, residency, and support tests. Typically, the child cannot have provided more than half of their own financial support for the year. As long as these dependency tests are met, parents can still claim the child, regardless of the child’s filing of their own tax return.