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Do Minors Have to Pay Income Tax?


Is your minor earning interest and dividends from investments you have under his name? Find out when minors need to pay income tax and how to file a tax return for a minor child.

2011 Income Requirements for Minors:

For the 2011 tax year, which is filed in 2012, minor children claimed as a dependent on your tax return must file their own taxes if they meet any of the following:
  • Unearned income is greater than $950. This includes the dividends and interest on savings accounts or investments in the minor child's name.
  • Earned income is greater than $5,800. This includes the money your minor earns at a part time job.
  • Self employment net earnings are greater than $400.
  • Earned and unearned total income is greater than the larger of $950 or earned income plus $300.

How to File a Tax Return for a Minor:

There are two ways you file an income tax return for a minor child depending on how he earned money.
  • Attach to parent's return. If your minor is under age 19 (or a full time student under 24), and the his income is less than $9,500 and only from interest and dividends, it can be attached to the parent's return using Form 8814. If there is any income from a part time job, you cannot attach your teen's tax return to your tax return. While this method is an easy way to file the tax return, it can however, result in higher taxes on qualified dividends or capital gains.
  • Complete individual tax return for minor. If the requirements are not met to attach it to the parent's return, or you want to ensure lower taxes, your minor child should file his own return. He can file a simple return for free at CompleteTax.

Kiddie Tax for Minors:

It's important to know that if interest plus dividends plus other investment income total more than $1,900, part of your minor's income will be taxed at the parent's tax rate instead of the child tax rate. This is referred to as the kiddie tax, which exists to make sure that the government is not losing tax revenue when parents shift income to their minor children.

Other Filing Requirements for Minors:

In addition to the income requirements, there are other circumstances when minors must file an income tax return. One example is tax on Social Security and Medicare uncollected by an employer. For all the requirements, see Publication 929, Tax Rules for Children and Dependents.

Teaching Kids About Taxes:

When you are working on filing taxes for your minor children, it's a great opportunity to teach them about taxes. If they have a job, explain to them that their employer will withhold taxes from their paycheck and give them a folder to save their paycheck stubs for tax time. In addition, have them help, by gathering their paychecks and adding up how much withholding they had. Show them where you enter the numbers on the tax forms to introduce your kids to taxes.

Optional Tax Filing for Minors:

Even if your minor is not required to file an income tax return, he can choose to file one. He may want to do this if he had withholding from a part-time job and wants to get a refund.

Once you determine that your minors will need to file a tax return, you can use CompleteTax to file a free tax return for a minor.

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