Do Minors File Income Tax?

Q: Do my minor children have to file tax returns if they had earned income, or can I just include their income on my return?

A: You can’t include a dependent’s earned income on your tax return. If it was unearned income, from interest, dividends, or other investments, you might be able to depending  on the amounts involved.

That means a minor child with employment income can file their own tax return. (This assumes that somebody somewhere is claiming that child as a dependent.) The minor may not be required to file a tax return, but they always can if they want to.

Minor dependents must file a return if their earned income in 2009 was more than $5,700. That’s the amount of the standard deduction. Income above that amount could be taxed, so they must file.

But even if minor dependents earned less than $5,700 in 2009, and don’t have to file a tax return, they should if any tax was withheld from their wages. With income under $5,700, their tax should be zero, so any withheld tax is a tax overpayment that can be refunded. But if they don’t file, they won’t get a refund.

The IRS collects tax on our adjusted gross income. Before the adjustments from standard and itemized deductions, gross income is, according to the IRS, “all income from whatever source derived.”

The two broadest categories of income are earned and unearned. In addition to requiring minor dependents to file a tax return if their earned income exceeds $5,700, the IRS also requires those minors to file if their unearned income exceeds $950. It would take a sizable savings account to generate $950 in interest, but there are certainly ways for CDs, dividends from stocks, and other investment income to exceed that threshold.

One other category of mandatory filers is minor dependents with net earnings from self-employment of at least $400.

Although parents can’t include a minor child’s earned income on the parent’s tax return, they can include some interest, dividend, or investment income. A child’s unearned income, then, is the only kind of income parents can include on their own tax return. And then, there are limits.

If interest and dividends are the minor dependent’s only income, and the total is less than $9,500, a parent can elect to include it on their own tax return. They use Form 8814.

The first $1,900 of a minor’s (under 18) unearned income is taxed at the child’s rate. Above $1,900, no matter whose return the income is reported on, a minor’s interest and dividend income is taxed at the parent’s rate. That prevents parents from creating tax shelters by putting accounts in their kids’ names, so that the income is taxed at the presumably lower kids’ rate.

Minors who file their own tax returns—because they’re required to file, or because they choose to file to get a refund—can sign their own names to the return. Parents aren’t usually entitled to information from the IRS about their minor children, although a child can authorize the IRS to disclose information, or even designate a parent as their representative to deal with the IRS.

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   Paul says:

   September 4, 2010 at 12:22 pm

   Good, solid, and concise article. Informative, and presented in layman’s terms. Thanks!

   reply