If My Dependent Has a W2, Do They Have to File Taxes?

A W2 form, or Wage and Tax Statement, is a document employers provide to employees detailing their annual wages and the taxes withheld from their pay. When a dependent receives a W2, it often raises questions about whether they need to file their own tax return and how this might affect the individual who claims them as a dependent. This article clarifies the circumstances under which a dependent with a W2 must file taxes and the implications for claiming them.

Dependent’s Tax Filing Obligation

A dependent’s requirement to file a tax return largely depends on the amount and type of income they receive. For the 2024 tax year, if a dependent’s earned income, such as wages reported on a W2, exceeds their standard deduction amount, they generally must file a tax return. Earned income includes wages, salaries, and tips.

The standard deduction for a dependent is calculated differently than for an independent taxpayer. For 2024, a dependent’s standard deduction is limited to the greater of $1,300 or their earned income plus $450. However, this amount cannot exceed the basic standard deduction for a single filer, which is $14,600 for 2024. For instance, if a dependent has $5,000 in earned income, their standard deduction would be $5,450 ($5,000 + $450), which is greater than $1,300.

If a dependent’s earned income from their W2 surpasses this calculated standard deduction, they are typically required to file a federal income tax return. Even if their income is below the filing threshold, filing a return might be beneficial if federal income tax was withheld from their paychecks, as this could result in a refund. For example, if Box 2 of their W2 shows withheld federal income tax, filing a return is the only way to potentially recover those funds.

Impact on Claiming Your Dependent

An individual can generally still be claimed as a dependent, even if they have a W2 and earned income, provided they meet specific dependency tests. The Internal Revenue Service (IRS) outlines criteria for claiming someone as a “qualifying child” or “qualifying relative.” These tests include relationship, age, residency, support, and joint return status.

For a “qualifying child,” the individual must generally be under age 19 (or under 24 if a full-time student) and live with the taxpayer for more than half the year. The support test requires the child not to have provided more than half of their own support for the year. The dependent’s earned income from a W2 does not automatically disqualify them from being claimed, as long as the parent or guardian still provides over half of their total support.

For a “qualifying relative,” there is a gross income test, meaning their gross income must be less than $5,050 for the 2024 tax year. Additionally, the taxpayer must provide more than half of the individual’s total support for the year. Therefore, a dependent’s W2 income primarily affects their own filing obligation, not necessarily the ability of another taxpayer to claim them, assuming other dependency criteria are met.

Filing Your Dependent’s Tax Return

Once it is determined that a dependent with a W2 needs to file a tax return, the process involves specific steps. The primary document required is the Form W2, which an employer provides by January 31st each year. This form details the dependent’s wages, tips, and other compensation in Box 1, and federal income tax withheld in Box 2.

The dependent will file their own federal income tax return using Form 1040, the U.S. Individual Income Tax Return. Information from the W2 is directly transferred to this form. For instance, the total wages from Box 1 of the W2 are reported on Form 1040. Any federal income tax withheld, shown in Box 2 of the W2, is entered on Form 1040 as a payment.

The dependent will claim their standard deduction on their Form 1040, calculated based on the rules for dependents. This deduction reduces their taxable income. If the federal income tax withheld from their wages (Box 2 of W2) exceeds their total tax liability after applying the standard deduction, they may be eligible for a refund. Tax returns can be submitted electronically through e-filing services or by mailing a paper return.