By Kevin Theissen
Many parents encourage their children to work so they can learn the values about work and managing money. But do they need to file a tax return for the money they earn?
The IRS does not exempt anyone from the requirement to file a tax return based on age, even if your child is declared as a dependent on your tax return.
Your dependent children must file a tax return when they earn above a certain amount of income.
Dependent children that earned (through their own work) over $12,400 are required to file an tax return. Dependent children with unearned income (usually investment income) of more than $1,100 must also file a return. There are other thresholds if your child has both earned and unearned, so please consult a professional with tax expertise regarding your individual situation.
Even if your child is not required to file a return, they should file if taxes were withheld from their income, or they qualify for the earned income credit, education, health or other possible tax credits.
Even if your child earns less than $12,400, the most common reason for filing a tax return would be if they are eligible to receive a tax refund.
Filing or not filing a child’s tax return should never be to avoid paying tax. It always good to remember that we all should pay 100% of the tax that is required — but not a penny more.
Kevin Theissen is the owner of HWC Financial in Ludlow.