It comes the time in every kid’s life when they are old enough to start taking casual jobs, from the classic lawn mowing gigs to more formal summer jobs at fast-food restaurants or local businesses. This might give parents a great sense of satisfaction as they see their kids growing up and becoming responsible members of a community. However, this also raises the question of who will be in charge of filing their income taxes on the money they make during this job. If you are asking yourself this question, these are some aspects to keep in mind.
To begin with, we need to remember that, as it is stated in IRS Publication 929, Tax Rules for Children and Dependents, our kids are the ones responsible for filing their own income taxes using standard Form 1040, as well as paying for any penalties or interests they may accrue. However, if our kids are not able to file their own income taxes for any reason, then the parents or guardians become legally responsible for filing their kids’ taxes. Parents and guardians are also able to sign the return if the kid isn’t able to, but we must include the words “By (signature), parent (or guardian) for minor child”.
Now, there are some situations in which our children will need to file their federal income tax return, and we should make sure we go over these situations with them as clearly as possible. Otherwise, they would be failing to file, and this could lead to IRS penalties and interests. These include:
- Your kid has more than $1,100 of unearned income.
- Your kid’s gross income exceeds the greater of $1,1000 or earned income of up to $11,650 plus $350.
- Your kid’s earned income is more than $12,200.
- Your kid owes other taxes, such as the self-employment tax or the alternative minimum tax.
Many parents tend to ask us if it isn’t easier for them to simply report the income of their kids as part of their own return, which is a very good question. As a parent or guardian, you can choose to report your kid’s income as part of your own return by including Form 8814 Parents’ Election To Report Child’s Interest and Dividends. However, this only applies if your child will be under age 19 as of December 31st, 2019, or if they will be a full-time student under age 24 by that same time, and their only income is generated by interests and dividends.
If your kid has taken a summer job this year and you are not sure about how to report their income tax, don’t hesitate and give us a call. It is never too early to get a professional giving the assistance that you need in this kind of situations.