Does your child need to file a tax return?

March 11, 2012
by piedfam

By Rita Hammond, CPA, MBA

Do your kids earn interest and dividends from investments you’ve made for them? Do they have a job? Find out when you need to files taxes for kids. We have summarized some general rules but their may be other considerations (education credits etc) that make your situation unique. If you have questions talk with your personal tax preparer or consult www.irs.gov.

2011 Income Requirements:
For the 2011 tax year, children claimed as a dependent on your return must file their own taxes if they meet any of the following:

•   Earned income is greater than $5,800.

•   Unearned income (like dividends and interest) is greater than $950.

•   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:
There are two methods to filing kid’s tax returns:

Kiddie Tax:
It’s important to know that if interest plus dividends plus other investment income total more than $1,900, part of the child’s income will be taxed at the parent’s tax rate instead of the child’s tax rate.

Other Filing Requirements:
In addition to the income requirements, there are other circumstances when children must file a tax return. One example is tax on Social Security and Medicare uncollected by an employer.

Optional Filing:
Even if a child is not required to file a 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.

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