Some minors are required to file yearly tax returns based on the amount and types of income received during the year, and some minors choose to file yearly returns to get a refund of federal income taxes paid during the year. The Internal Revenue Service does set rules to help minors and their parents determine if a child must file a return. However, regardless of whether the child must file or simply chooses to do so, most parents are still allowed a dependency exemption on their returns for the minor.
Minors who work or receive unearned income such as dividends and interest may be required to file a return, depending on the amounts of income they receive during the year. As of publication, a minor with earned income in excess of $5,950 or unearned income in excess of $950 must file his own return. Earned income comes from wages or self-employment, while unearned income comes from interest, dividends and capital gains. The income limits for earned and unearned income change each year.
If a child’s only source of income is from interest and dividends, a parent may elect to report the income on his own return in lieu of the child reporting the income on a separate return. This eliminates the child’s responsibility for paying tax on the unearned income but may increase a parent’s overall tax bill, since the parent adds the income to his own taxable income total. A parent can only make this election by attaching IRS Form 8814 to his return, and only if the minor does not have income from other sources, such as capital gains or W-2 employment. The minor’s interest and dividend income must also be less than $9,500 with no federal income tax withheld.
Although a minor who files annually may meet IRS rules that require him to file, an adult may still be eligible to claim the child as a dependent. Adults with dependent children must meet several tests in order to claim a minor as a dependent. These include the relationship, age, residency, support and joint return tests. A minor’s income is not one of the tests an adult must meet to claim the child as a dependent. If the adult meets all required tests, he is eligible to claim the child as a dependent. He does not need to report the minor’s income on his return but will receive a tax benefit for claiming the child. If the child also needs to file his own return, he will indicate that he is also the dependent of someone else on his 1040 income tax form.
Electronically filing is a popular method of return submission, because return forms do not have to printed and mailed. Instead of requiring the filer to sign a hard copy of the return before sending it off, the IRS uses an electronic personal identification number in place of a signature. However, if a minor is under age 16 and has never filed before, he can’t choose his own PIN. Self-select PINs are required by most major tax software programs in order to e-file. If a minor has an issue creating a PIN to submit his return electronically, he may still print and file the return, have a tax professional prepare his return and create a PIN for him or call the IRS at 866-704-7388 for assistance.
- Turbo Tax: Tax Filing Requirements for Children
- Internal Revenue Service: Self-Select PIN Method for Forms 1040 and 4868
- Internal Revenue Service: Publication 501 - Exemptions, Standard Deduction and Filing Information: Dependents
- Internal Revenue Service: Publication 501 - Exemptions, Standard Deduction and Filing Information: Qualifying Child
- Internal Revenue Service: Form 8814
- Internal Revenue Service: Practitioner PIN Method for Forms 1040 and 4868
- Internal Revenue Service: Electronic Filing PIN Request