By Kevin Theissen
With the continuation of the Covid world, many businesses are desperate to find and keep workers. So, helping our children find a job is not very difficult these days. Perhaps more importantly, it’s the effort of encouraging them to work so they can learn important values about work, independence and understanding how to handle money and finances. At what point, if at all, do children need to file an income 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 with earned income in excess of $12,550 must file an income tax return.
Dependent children with unearned income of more than $1,100 must also file a return, and also if the dependent child’s earned and unearned income together total more than the larger of $1,100, or a total earned income up to $12,200 plus $350.
These thresholds are subject to change, so please consult a professional with tax expertise regarding your individual situation.
Here’s an example: Davy is a 19-year-old student who’s claimed as a dependent by his parents. He received $400 in unearned income and $4,500 for a part-time job on campus. He does not have to file a tax return because both his unearned and earned income fall below the thresholds. Kyle’s total income of $4,900 is less than his total earned income plus $350.
Even if your child earns less than the threshold amount, filing a tax return may be worthwhile if your child is eligible for a tax refund.
Kevin Theissen is the owner and principal of HWC Financial in Ludlow.