Rules for a Child to File a Federal Tax Return

by Tom Streissguth, Demand Media

Anyone that earns income over an amount set by the tax code must file a tax return -- this means adults as well as children, and even if you are a youthful dependent. The IRS allows parents (or legal guardians) to prepare and sign tax returns, and pay taxes, on behalf of their children, and sets certain rules for children with unearned income. Otherwise, children use the same return and are subject to the same rules on credits, deductions and exemptions.

Filing Requirements

By the tax rules, earned income is money you take home from a job, or from your own business. Unearned income comes from investments, savings accounts and benefits such as Social Security. If you are a dependent and only have earned income, you must file a return if the amount is more than $5,950. If you only bring in unearned income, then you must file a return for income of more than $950. If you earned both kinds of income, then you must file a return if you made more than the larger of $950 or your earned income (up to $5,650) plus $300. Slightly different limits apply for married dependents.

Special Cases

There are a few other circumstances when children must file tax returns, no matter the amount of their earned and/or unearned income. If a child is self-employed and had net earnings of at least $400, or owes Social Security taxes on unreported tips, then the IRS needs a tax return. Any money the child earns is subject to income tax, even if a parent receives it or handles it. The same goes for expenses -- they belong to the child if paid on the child's behalf and by a parent. If the proper tax is not paid, the IRS will hold the parent liable.

Optional Returns

A tax return may be optional, and in some cases a good idea. If an employer withheld money for income taxes, the only way to claim a refund is to file a tax return. This is also required if a dependent qualifies for a refundable credit, such as the earned income credit, or the American Opportunity educational credit. With a refundable credit, if you owe no taxes but are still eligible for a tax credit, you can claim the credit amount as a refund.

Rules, Rates and Returns

Income tax rates, deduction amounts, and available credits and exemptions are the same for children and adults. A dependent who can be claimed on someone else's return for an exemption cannot claim that exemption himself. The IRS does not provide a different return for children -- they must use either Form 1040, 1040A or 1040EZ. A parent can sign the return for the child by filling in the child's name on the signature line, then signing below the line. The signature must be preceded with "By" and followed by "as parent (or guardian) for minor child." If the child signs the return, then he can designate a third party to deal with the IRS by checking a box on the bottom of the return.

Gifts and Kiddie Taxes

The IRS slaps a gift tax on transfers over $14,000 per year (as of 2013), with a $5.25 million lifetime exemption. However, if you gift income-producing assets such as stocks or mutual funds, the tax law has come up with the "kiddie tax" to prevent any escape from income tax. As of 2013, a child under 19 (or 24, if a full-time student) pays no tax on $1,000 or less of unearned income; unearned income between $1,001 and $2,000 is taxed at the child's rate, and unearned income over $2,001 is taxed at the marginal rate enjoyed by the parent(s).

About the Author

Founder/president of the innovative reference publisher The Archive LLC, Tom Streissguth has been a self-employed business owner, independent bookseller and freelance author in the school/library market. Holding a bachelor's degree from Yale, Streissguth has published more than 100 works of history, biography, current affairs and geography for young readers.