The biggest question in the category of children filing taxes is whether they need to or not. Believe it or not, they just might. If a child earns over $5350 as reported on a W-2 and is claimed on someone else’s tax return as a dependent, that child must file an income tax return. If the child claims him or herself as a dependent, the child must file for earnings above $8750. If a child is determined to be an independent contractor, he or she must file for earnings of more than $400 because of the self-employment tax. Children earning less than these amounts are not required to file, but they should consider doing so because any withholding will be refunded.
If your child has an earned income and it is decided that he or she should file an income tax return, they do so separately from you. You can decide whether to claim your child as a dependent or not. This is a pretty simple financial decision. If the child earns more than the combined income of his or her parents, it benefits the family to allow the child to file as their own dependent. If the child earns less than the combined income of both parents, it benefits the family to claim the child as a dependent.
You should, however, be informed that dependency issues pertaining to children can become quite involved and that they may have repercussions beyond issues of taxes. If you have a child who earns more than you and your spouse combined, you should have an attorney you can consult in this regard.
Parents often wonder if having a working child will impact their own taxes. The answer to this is, except for the issue of dependency we just addressed, rarely. If your child earns enough money to file an income tax return, then he or she is a taxpayer in his or her own right. The wage earnings of a minor child impact the taxes of his or her parents no more or less than the earnings of an adult child.
In this regard, you need to look out for your minor child by keeping all necessary records, documentation, and receipts applicable to their tax situation. Just like your own taxes, you want to make certain that your child does not overpay the Internal Revenue Service simply because he or she is a child. Be certain that your child’s tax liability is as low as legitimately possible, just like your own. Remember that your child is now a taxpayer and is entitled to all legitimate credits, exemptions, and deductions under the tax code.
When your child starts acting in movies, you need to pay taxes on his income. This is an unexpected response and you desperately look out for good tips. Here are some useful ones offered by Chintamani Abhyankar.