Children And Taxes: When Kids Are Required To File A Tax Return

As kids get older, it is inevitable that they will want more money to buy things like clothes, music, a new car, etc. Many kids will get a job or even start their own company to meet their demand for more "stuff".

While most kids don't earn enough money to worry about filing a tax return, some will be required to file based on the type and amount of income they earn. How do you know when your child is required to file a tax return?

In general, children who are dependents (claimed on someone else's tax return) must file a tax return if:

- they have earned income of $5,700 or higher (this is the standard deduction amount for 2009, the amount for 2008 was $5,450)
- they have unearned income (investment income) of $950 in 2009 ($900 in 2008)
- they have gross income (both earned and unearned) in excess of the larger of $950 or their earned income plus $300.

The most popular reason kids would need to file a tax return is because they had earned income from a part time job or because they are lucky enough to have investments in their own name, as described in the above rules. However, the following children may also need to file a tax return:

- those who have earned income and who received advanced earned income credit payments from his or her employer,
- kids who had wages of $108.28 or more from a church, that is exempt from employer Social Security and Medicare taxes, or
- kids who had net earnings from self employment or their own business of at least $400.

Here's an example of a teenager who would be required to file a tax return: Tommy is 14 and his parents claim him as a dependent on their tax return. In 2008, Tommy started a lawn mowing business and earned $750, after paying for gasoline and other expenses. Because he is considered self employed and earned more than $400, Tommy is required to file a tax return. On the flip side, if Tommy had worked for someone else as an employee and only earned $750, he would not have been required to file a tax return.
Filing your child's tax return:

Kids who only have unearned income (from investments, for example) can either file their own tax return or their parents can claim the income on their tax return.

If the child is required to file because she has earned income from an employer, or if she has a business of her own, then she will need to file her own tax return. In addition, children with their own businesses will need to complete Schedule C - Profit or Loss From Business and Schedule SE - Self Employment Tax and attach these to their income tax return.


Parents: want to learn how to minimize your family's taxes? If you have a small business, or if your child has their own business, you'll want to learn how to hire your children to help minimize your family's tax burden.

Recommended Resources:

• Child Entrepreneurs: Don't Forget About Taxes
• Tax Benefits For Hiring Your Children
• Kids and Money on Zimbio
• Five Tips To Minimize Your Family's Taxes
• Is Your Child Required To File A Tax Return?