When and Why Do Kids Need to File Taxes?

Parents and guardians often wonder if their children need to file a tax return. While many children do not have a filing requirement, certain circumstances trigger this obligation. Understanding these situations is important for ensuring compliance with tax regulations. This guide clarifies the conditions under which a child must file taxes and outlines the necessary steps.

Determining Filing Requirements for Children

A child’s obligation to file a federal income tax return depends on the amount and type of income they receive, and their dependency status. For the 2024 tax year, a dependent’s standard deduction is limited to the greater of $1,300 or their earned income plus $450, but not more than $14,600. This deduction directly impacts the income thresholds for filing.

Children with earned income, such as wages from a job or earnings from self-employment like babysitting or lawn care, must file a return if their earned income exceeds $14,600 for the 2024 tax year. For example, if a child earns $15,000 from a summer job, they would need to file.

Unearned income, which includes interest, dividends, and capital gains from investments, has a much lower filing threshold. A dependent child must file a tax return if their unearned income exceeds $1,300 for the 2024 tax year. This rule is part of the “Kiddie Tax” provisions (Internal Revenue Code Section 1), designed to prevent income shifting to children in lower tax brackets.

If a child has both earned and unearned income, the filing requirement is triggered if their gross income is more than the larger of $1,300, or their earned income (up to $14,150) plus $450. The Kiddie Tax applies to unearned income exceeding $2,600 for 2024, taxing it at the parent’s marginal tax rate. This applies to children under 18, or full-time students between 19 and 23 whose earned income does not exceed half of their support.

Other less common situations can also require a child to file. This includes if a child received advance payments of the premium tax credit or owes special taxes, such as uncollected Social Security and Medicare tax on tips.

Gathering Information for a Child’s Tax Return

Before filing a child’s tax return, gather all relevant information and documentation. This preparation streamlines the process and helps ensure accuracy.

The necessary documents vary depending on the types of income the child received. Common tax forms a child might receive include Form W-2 for wages earned from an employer. For unearned income, forms such as Form 1099-INT for interest, Form 1099-DIV for dividends, and Schedule K-1 for income from trusts or partnerships are common.

In addition to income forms, personal information for the child is necessary, including their full legal name, date of birth, and Social Security number. This information is fundamental for accurate identification on the tax return. The parent’s or guardian’s Social Security number may also be required, particularly if the child is claimed as a dependent or if the Kiddie Tax rules apply to the child’s unearned income.

Other financial details, such as any savings account interest not reported on a Form 1099-INT, or income from various gig economy jobs, should be included. Any educational expenses that might qualify for deductions or credits should also be considered if applicable.

Filing a Child’s Tax Return

Once all necessary information has been gathered, several methods are available for submitting a child’s tax return. Electronic filing is a popular option, often done through commercial tax software programs. Many software solutions guide users through inputting data and electronically submitting the return to the Internal Revenue Service (IRS).

Alternatively, a paper return can be filed by mail. The IRS provides instructions and mailing addresses for submitting paper forms, which can be found in IRS publications. When mailing, keep a copy of the submitted return and any supporting documents for personal records.

In certain situations, parents may elect to include their child’s unearned income on their own tax return. This option, available by filing Form 8814, Parents’ Election To Report Child’s Interest and Dividends, can simplify the filing process as it avoids the need for a separate tax return for the child. This election is available if the child’s only income is from interest and dividends, their gross income is below $13,000 for 2024, and they meet age requirements for the Kiddie Tax. After filing, electronic submissions receive a confirmation of receipt, while paper returns may take several weeks to process.

Reasons to File Even If Not Required

Even if a child’s income does not meet mandatory filing thresholds, there are reasons to file a tax return. A key benefit is to receive a refund of any federal income tax withheld from their wages. If a child worked a job and had taxes deducted from their paychecks, filing a return is the only way to recover that overpayment.

Filing a tax return, especially when a child has earned income, also contributes to their Social Security earnings record. These reported earnings determine eligibility and the amount of future Social Security and Medicare benefits the child may receive later in life. Establishing this record early can be advantageous for their long-term financial planning.

Filing a tax return helps to establish a formal tax history for the child. This can be beneficial for various reasons in the future, such as when applying for student financial aid or certain types of loans, where a history of tax filing may be considered.