Does My Teen Need to File Taxes?Pat Fontana
The filing deadline for 2020 taxes has been extended to May 17, 2021, for both federal and Arizona state taxes. As you prepare your own tax returns, you may have teenagers who are questioning whether they need to do the same. Does your teen need to file taxes?
Even if your teen does have to file their own tax return, you can still claim them as a dependent on your own return under most circumstances. A teenage dependent is defined by the Internal Revenue Service (IRS) as someone who:
- Is a qualifying child, including your son, daughter, stepchild, foster child, or a descendant (for example, your grandchild)
- Is a child who meets the qualifications listed below, including your brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant
- Was under age 19 at the end of the year (2020) and younger than you (or your spouse if filing jointly)
- Lived with you for more than half the year
- Did not provide more than half of his or her own support for the year
- Is not filing a joint return for the year.
There are, of course, exceptions and separate rules for special situations.
Also, if you can be claimed as a dependent by another taxpayer, you can’t claim anyone else as a dependent. If you are filing a joint return and your spouse can be claimed as a dependent by another taxpayer, you and your spouse can’t claim any dependents on your joint return.
When Your Teen Needs to File Taxes
Your teen will need to file a tax return if their unearned income was more than $1,100 or their earned income was more than $12,400. They must also file if their gross income was more than the larger of the $1,100 or their earned income (up to $12,050) plus $350.
Earned income includes salaries, wages, professional fees, and other amounts received as pay for work your teen actually performs. The amount they earn by performing services are included in his or her gross income and not the gross income of the parent. This is true even if under local law you, as the child’s parent, have the right to the earnings and may actually have received them. But if the child doesn’t pay the tax due on this income, you are liable for the tax as the parent.
Unearned income includes income such as interest, dividends, and capital gains. Trust distributions of interest, dividends, capital gains, and survivor annuities are also considered unearned income. You may be able to include your teen’s interest and dividend income on your tax return. If you do this, your child won’t have to file a return.
Teenagers often operate their own ventures to earn money. If they work for another business, they will receive a W-2. However, if they work as a contractor or as a self-employed individual, they will receive a 1099 form if they provided services to a company that totaled more than $600.
If your teen’s net self-employment income for the year was over $400, whether or not they receive 1099s, they will also have to file a tax return. In this case, they would file a Schedule SE along with their form 1040.
Tax Tips for Teens
Your teen should file a tax return if they held a job and received a paycheck that had taxes withheld. They will definitely want to determine if they qualify to receive a tax refund. Filing this year can also help your child learn how the tax system works on the federal and state levels so they will be better prepared when they have to do their own taxes as an adult.
In addition to including their Social Security number and the appropriate information about themselves and their income, they should remember to check the box on their form that indicates that someone else is claiming them as a dependent.
It’s important to know that the teen is legally responsible for filing and signing their own tax returns. Prepare them to be sure that all of the figures are accurate and the filing is done in a timely manner.
CLEAR VIEW BUSINESS SOLUTIONS CAN HELP
Filing tax returns can be confusing at any age. The experts at Clear View know what you need to do and when you need to do it. We can help ensure that you are maximizing your available credits and deductions and minimizing your tax payment. We work with you at tax time and throughout the year to help you be better prepared to make sound financial decisions and to plan for your success. Learn more about how we can help you and your business by contacting Clear View Business Solutions to speak to our team about our services. Give us a call at (520) 544-0177.