Does my child have to file a tax return?

December, 21 2023 by Karen Thomas-Brandt, EA

We all remember our first jobs as a kid – babysitting, waiting tables, newspaper routes – and filing a tax return was probably the furthest thing from our minds. As parents, though, when our kid starts to earn a little money, we may wonder, “Does my child have to file a tax return?”

A child who qualifies as a dependent on their parent’s tax return will need to file a tax return in one of the following situations (for 2022):

1. They have more than $1,150 of unearned income (such as interest or dividends),
2. They have more than $12,950 of earned income (such as wages), or
3. They have a total gross income (earned income plus unearned income) of more than the larger of:
   1. $1,150 or
   2. their earned income (up to $12,550) plus $400.

In most situations, a child going to school full-time and working a part-time job a few hours a week will not have a filing requirement, but there may still be a reason to file.
 

Let’s look at some examples.

John, age 20, is a full-time student and works part-time at the school bookstore. He qualifies to be claimed as a dependent on his parent’s tax return. In 2022, John earned $6,000 from his part-time job and received $550 in interest. Even though John’s earned income is under the threshold in situation #2 above (more than $12,950), his total gross income puts him over the limits outlined in situation #3 above (total gross income ($6,000 earned plus $550 unearned = $6,550) exceeds earned income plus $400 = $6,400). In this case, John needs to file a tax return for tax year 2022.

Sally, age 16, works as a barista at the local coffee shop. In 2022, she earned $5,000 and had no unearned income. Sally qualifies as a dependent on her parent’s tax return but doesn’t know if she should file her own tax return. As a dependent on her parent’s return, Sally only needs to file if she earned more than $12,950 (situation #2 above), which she did not; however, if Sally had any federal income taxes withheld, she will need to file to get a refund of those withholdings.

Tim, age 13, received no earned income in 2022; however, he received $1,500 in taxable interest and dividends. Tim is claimed as a dependent on his parent’s tax return. Because Tim is over the unearned income limit for filing (situation #1 above), he needs to file a tax return. However, for children who have dividend and interest income (including capital gains) under $11,500 (in 2022), their parents can elect to include that income on their own tax return. This could result in a higher tax liability than if the child had claimed the income on their own return, so it is advised you consult a tax professional to figure out what is best for your situation.

One final note is regarding income earned as a contractor (think DoorDash or Uber) where your child would receive Form 1099-NEC rather than Form W-2. Contractors with net earnings (income minus expenses) greater than $400 are subject to self-employment taxes (Social Security and Medicare tax). These folks will have to file a return even if they don’t meet the earned income and unearned income situations listed above.

Figuring out whether your child should file a tax return can be difficult. If you are an audit defense member and you or your child are facing an audit involving filing requirements, please reach out to us so we can help.