Kids these days are ambitious and do not mind having a side job to earn some income. For kids young and classified as dependents, they will need to pay taxes. There are cases you might simply include your kid's income on your tax return. In other cases, they will need to file their personal tax return, or the parent will file a separate one for them.
This, most times, is the factor of the amount and source of income for the minor.
Earned income
At the start of 2018, a minor that can be claimed on their parent’s tax return as a dependent needs to file an income tax return as soon as their income is above the standard deduction. As of the 2020 tax year, the value is 1,100 USD or above. Information from IRS pub 929 reveals what the limit is if the earnings of the minor exceed the value of the standard personal exemption.
A 14-year-old kid, for instance, that works after school and earns around 1000 USD, does not have to worry about filing a tax return. If the employer withholds some amount from the paycheck as tax, she can file a return and obtain the funds.
Unearned Income
There is a cutoff value for "unearned income" from the IRS to incomes like interest or dividends. A child with income above the year's level needs to file a tax return. He, however, will not have to file a tax return if the payment is below the cutoff level.
A kid that has both unearned and earned income will add both incomes together. With this, they can decide if the income combination raises the mandatory filing requirement. IRS publication 929 has a guide for estimating this,
Additional requirements
For a minor with income below the minimum value, there are other conditions set by Uncle Sam, which could trigger the need for a tax return. For instance, a minor will have to file if he owes Medicare or Social Security taxes related to tip income.
Also, if there are earnings from self-employment income, there might be the need to pay self-employment tax. This translates to paying both the worker and employer's share of the Medicare and Social Security Tax.
Filing on Behalf of Your Kid
If your kid needs to file tax for income that is not earned, there is the option of having a claim to the money using your tax return. There are, however, a couple of restrictions, like a limit to the value of money involved. The money you will owe as tax might be more than what you will owe if your kid files an individual tax return.
People that qualify will need to file Form 8814 using form 1040, and your kid will not have to file.
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