Should My Child File a Tax Return?

Navigating tax obligations can be complex, especially when considering whether a child needs to file a tax return. While many assume tax filing is solely for adults, certain income levels or types of earnings can trigger a filing requirement for younger individuals. Understanding these specific conditions helps families ensure compliance with tax laws and potentially claim refunds. This guide outlines the circumstances under which a child must file, reasons to consider filing voluntarily, and the practical steps involved in preparing and submitting a return.

When a Child Must File

A child’s obligation to file a federal income tax return depends on the amount and type of income received during the tax year. The Internal Revenue Service (IRS) distinguishes between earned income, such as wages from a job, and unearned income, which includes interest, dividends, and capital gains from investments. Specific thresholds for these income types determine if a dependent child is required to file.

For the 2024 tax year, a dependent child must file a return if their unearned income exceeded $1,300. This threshold applies to income from sources like savings accounts, stocks, or mutual funds. If a child’s income is solely from earned sources, they must file if their earned income was more than $14,600. A filing requirement also arises if the child’s gross income, which is the total of their earned and unearned income, exceeded the larger of $1,300 or their earned income plus $450, up to $14,150.

The “kiddie tax” rules apply to certain children with significant unearned income, specifically if it exceeds $2,600 for the 2024 tax year. Under these rules, the first $1,300 of a child’s unearned income is tax-free, and the next $1,300 is taxed at the child’s own tax rate. Any unearned income above $2,600 is then taxed at the parent’s marginal tax rate, which is higher. This ensures that investment income cannot be shifted to children in lower tax brackets to avoid higher parental tax rates.

If the kiddie tax applies, Form 8615, Tax for Certain Children Who Have Unearned Income, may be required. Parents might also elect to report the child’s interest and dividends on their own return using Form 8814, Parents’ Election To Report Child’s Interest and Dividends, if certain conditions are met.

Reasons to File Voluntarily

Even if a child is not legally required to file a tax return, filing voluntarily can be beneficial. The primary reason to file is to claim a refund for any federal income tax withheld from their pay. Employers withhold income tax from wages based on Form W-4, Employee’s Withholding Certificate, which can result in an overpayment if the child’s annual income falls below the filing threshold or their tax liability is less than the amount withheld.

If a child worked a summer job and had federal income tax withheld, they may be entitled to a full refund of the withheld taxes if their total income for the year is below the filing requirement. Filing a return is the only way to recover this overpaid amount.

A child might also be eligible for certain refundable tax credits, which could provide a refund even if no tax was withheld or if their tax liability was zero. For example, the Earned Income Tax Credit (EITC) could apply in specific circumstances, though it has age and income requirements that make it rare for a dependent child to qualify. Education credits could also be a factor if the child attends higher education and meets specific criteria.

Gathering Necessary Information

Before completing a tax return, gather all pertinent financial and personal documentation. Having these items readily available streamlines the filing experience and helps ensure accuracy.

Key documents for a child’s tax return include any Form W-2s received from employers, detailing wages earned and income tax withheld. For investment income, Form 1099-INT reports interest income, and Form 1099-DIV reports dividend income. These forms are mailed by financial institutions in late January or early February. The child’s Social Security number is also required for identification purposes on the tax return, along with their full legal name, current address, and date of birth.

Completing and Submitting the Return

Once all necessary information has been assembled, the next step involves completing and submitting the tax return to the IRS. Several methods are available for preparing and filing a return, each offering different levels of convenience. The most suitable method depends on the complexity of the child’s tax situation and personal preference.

One common approach is to utilize tax preparation software, available online and as desktop applications. These programs guide users through the filing process by asking questions and automatically populating the correct forms, simplifying calculations and reducing errors. Another option is to engage a tax professional, such as a certified public accountant (CPA) or an enrolled agent, who can prepare and file the return, providing expert advice. For those comfortable with manual preparation, paper forms like Form 1040 can be filled out directly.

After the return is completed, it must be submitted to the IRS. Electronic filing, or e-file, is the preferred method for most taxpayers due to its efficiency, resulting in faster processing of refunds and providing an electronic confirmation of receipt. Alternatively, a paper return can be mailed to the IRS, though this takes longer to process. Sign the return where required and keep copies of all submitted forms and supporting documents for personal records for at least three years from the filing date.