The Social Security Administration pays retirement, disability and survivor benefits to people qualified to receive them, including minor children. Whether the SSA benefits that a person receives are subject to federal income taxes depends on the amount of income the individual receives from all sources, including work, the SSA, retirement funds and investments. If the SSA appoints a minor child’s parent as his representative payee, who is responsible for receiving and managing the child’s SSA benefits, the parent does not include the minor’s SSA benefits on his personal federal tax return.
The SSA considers a child eligible to receive SSA benefits based on the work record of a parent qualified to receive SSA benefits if he is single, under 18 (19 if a full-time student in grade 12 or below) or disabled before age 22. Under most circumstances, the SSA assigns a representative payee to manage SSA benefits paid to a child under age 18.
The SSA considers individuals close to a beneficiary, a beneficiary’s parent and certain organizations as candidates to represent a minor SSA benefit recipient as his payee. Unlike with other types of payees, the SSA allows a parent serving as his child’s representative payee to receive his child’s SSA monthly benefit in a checking or savings account owned by the payee. The SSA requires the parent to account for how he spends his child’s benefit and examines his records at least once per year.
The SSA sends SSA Form-1099 to a beneficiary’s payee at the end of each year. The form shows the exact amount the child received in benefit payments based on a single work record. A child’s parent may receive more than one SSA Form-1099 if the child received benefits based on more than one qualified worker’s history.
Box 1 of SSA Form-1099 displays the name of the person on whose behalf the SSA paid benefits, while Box 2 displays the child’s Social Security number. Box 3 shows the amount of benefits the SSA paid on behalf of the minor child minus any adjustments. SSA Form-1099 also shows other amounts, such as money voluntarily withheld for taxes or amounts paid to an attorney, if any.
The Internal Revenue Service considers the person on whose behalf the SSA pays benefits responsible for paying federal taxes on them. In other words, a payee prepares a tax return on behalf of a child receiving SSA benefits that is separate from his own.
Generally, if a person receives only SSA benefits as income during a tax year, he will not owe federal taxes on his benefits. If the amount received by a child from all income sources, including the SSA, equals more than the corresponding IRS base amount of $25,000 in 2011, he may owe federal taxes on his benefits, however.
To determine if the IRS may tax his minor child’s SSA benefits, a parent would add one half of the figure displayed in Box 3 of SSA Form-1099 to the total of his child’s other income, including interest earned on tax-exempt investments and other ordinary exclusions. If the result is greater than $25,000, the payee’s minor child may owe federal taxes independently of his parent.
- Internal Revenue Service; Publication 915 Social Security and Equivalent Railroad Retirement Benefits; 2010
- IRS.gov; Are Your Social Security Benefits Taxable?; February 2011
- Social Security Online; A Guide for Representative Payees; January 2009
- Social Security Online; Benefits for Chidren; June 2011
- Internal Revenue Service (IRS). "Social Security Income: Are Social Security Survivor Benefits for Children Considered Taxable Income?" Accessed Feb. 22, 2020.
- Social Security Administration. "Form SSA-4: Information You Need To Apply for Child's Benefits." Accessed Feb. 22, 2020.
- Internal Revenue Service (IRS). "Publication 501 (2019), Dependents, Standard Deduction, and Filing Information." Accessed Feb. 22, 2020.
- Social Security Administration. "Get a Copy of Your Social Security 1099 (SSA-1099) Tax Form Online." Accessed Feb. 22, 2020.
Deborah Barlowe began writing professionally in 2010. With experience in earning securities and insurance licenses and having owned a successful business, her articles have focused predominantly on finance and entrepreneurship. Barlowe holds a bachelor’s degree in hotel administration from Cornell University.