Does your teenager have a part-time job? Or is your teenager earning interest and dividends from investments they received as a child? Find out when teenagers need to file a tax return and how to file a tax return for a teenager.
2018 Income Requirements for Teenagers
For tax year 2018, a dependent such as a teenager must complete a tax return if their unearned income was over $1,050, or their earned income was over $6,350, or their gross income (earned and unearned income combined) was more than the larger of $1,050 or their earned income (up to $6,000) plus $350.
For example, if a teenager works after school and earns less than $1,050, they would owe nothing in taxes. However, if an employer withheld taxes from their paycheck, they will have to file a tax return to obtain a refund.
If the child has both earned and unearned income, both amounts must be added together to determine if the total triggers mandatory filing. The IRS provides a formula for figuring this out in Publication 929.
If a minor's income is less than the minimum threshold, the IRS sets other conditions that may require a tax return to be filed. For example, if a teenager owes Social Security or Medicare taxes on tip income.
In addition, if a teenager is self-employed, they may be required to pay self-employment tax, which means paying both the employee’s and employer's share of Social Security and Medicaid taxes. The threshold for self-employment tax has been $400 since 1990, but this may change in the future.
Filing on Behalf of Your Child
If your child is required to file a tax return for unearned income, you can claim the money on your return instead. The IRS places certain restrictions including a limit on the amount of money, and the tax you will owe may be greater than if your child filed an individual return. If you qualify, you can file Form 8814 with your 1040, and the IRS will not require your child to file.
Kiddie Tax for Teens
The exemption from the kiddie tax for 2018 is $2,100. A parent can include a child’s income on their own return for 2018 if the child’s income is more than $1,050 and less than $10,500.
Teaching Teens About Taxes
When you are working on filing taxes for your teenager, it's a great opportunity to them about taxes. If your teen has a job, explain that some employers withhold taxes from paychecks and suggest that your teen saves all paycheck stubs for tax time. Have your teen do the tax filing by gathering their paychecks and adding up the withholding. Show your teen where to enter the numbers on the tax forms and how to submit them.
Note that the above is a synopsis of the IRS rules that apply. There are numerous exceptions to these rules, and the IRS is constantly changing them. To be sure you are fulfilling your own and your child's requirements, confer with a tax accountant familiar with your family. IRS Publication 929, "Tax Rules for Children and Dependents."