Getting your first job is a right of passage. But you may own income tax if you're under 18, even if your parents or someone else claims you as a dependent on their taxes. It all comes down to how much money you make. You'll have to prepare a return if you earn more than $6,350 at a job or $1,050 on investments or interest for the 2017 tax year. However, if you earn less, you still should file a return if your employer paid federal taxes on your behalf, as you may qualify for a refund.
Am I Considered a Dependent?
The Internal Revenue Service allows parents and guardians to receive a break on their taxes for teens and the costs associated with providing financial support for dependents. You may qualify as a dependent if you live with a parent or guardian for more than half of the year and they provide more than half of your financial support. Your dependency status continues until you turn 19 – or 24 if you go to school full-time.
What Is Earned Income?
It really doesn't matter how adults earn money, the IRS treats earned and unearned income – investment income – the same. When you're a teen, jobs don't matter as much as either, but how much you earn does. However, as a minor, income from a job is treated differently than income generated by accounts that produce interest and dividends. If you get paid an hourly wage or salary, you've earned income in the eyes of the IRS and will pay taxes – no matter your age – if you reach $6,350 in earnings for 2017 and $12,000 for tax year 2018. This substantial increase from 2017 figures is due to new tax reforms, also known as the Tax Cuts and Jobs Act that largely went into affect for tax year 2018.
Unearned Income and Investments
Some bank accounts and other investments, like bonds, pay you a percentage of your account balance in the form of interest. On the other hand, some companies pay dividends – a piece of their earnings based on the number of shares of stock you own. If you own these types of accounts or stock, and you receive more than $1,050 in interest or dividends, you'll have to file a return unless your parents report the unearned income on their tax returns. Typically, it makes more sense for you to do so, since your taxes likely will be lower. It is worth noting, there was no change in unearned income thresholds for tax year 2018.
Filling Your Taxes and Form 1040
When you start working, you might have wondered at what age do you have to pay taxes. The IRS is clear on filing income tax under 18 – if you earn income, you can be taxed on it. If you determine you need to file taxes, complete Form 1040 or Form 1040EZ, a quicker, simpler version of the 1040 for taxpayers without dependents. Not everyone chooses to file the 1040EZ and both come with an instruction booklet that gives you step-by-step instructions for filling out the forms. IRS.gov also provides printable forms and e-filing options. You’ll also use the W-2, sent to you by your employer. If necessary, reference any 1099-INTs and 1099-DIVs for your unearned income.
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