How Do Minors File Income Taxes?

Minors are generally dependent on their parents' or guardians' income tax return. But do they also have to file their own federal tax return? If so, how do they do that? Obviously, a baby cannot prepare and file their own tax return. Are their parents responsible for signing and filing their return? Read on to learn more about minors filing income taxes.

Difficulty: Moderate

Instructions

1. Calculate gross income. Gross income includes income of the minor from all sources. This is generally earned income and investment income. The total income is the determining factor related to how the return is filed. Investment Income over a specified amount causes the minor's (child under 18 years of age) income to be taxed at the parents' rate and included on the parents' return on Form 8615 rather than on the minor's personal return.

2. Determine if the minor's investment income requires their income to be included on their parents' return. If not, determine if the minor's income is high enough to require them to file their own return. If so, option one is to include all income of the minor on their own personal return. Option two is to include the minor's income on the parents' return on Form 8814. This can only be done if the minor's income is only from interest and dividends, including capital gain distributions that total less than $8,500; they did not pay estimated tax payments; they did not have a prior year's overpayment applied to the current year; and they did not have federal tax withholding.

3. Assuming the decision is for the minor taxpayer to file their own return--do not take the personal exemption of the minor on their personal return when filing a separate return for the minor. Since the parent is entitled to claim the dependency deduction for the minor the minor is not entitled to their own personal exemption.

4. Calculate the standard deduction according to the rules for a dependent. Dependents are not entitled to the same standard deduction as a single filer who claims their own dependency exemption.

5. Calculate the tax based on the taxable income from the appropriate IRS tax table (see Resources below).

6. Sign and date the return. Technically the minor is responsible for filing his tax return and for payment of tax and any penalties and interest. If a minor is unable to file their own return for any reason, such as age or disability, the parent or guardian is responsible for filing and payment. If a minor is unable to sign his own return, the parent or guardian should sign the minor's name on the signature line and then add the following: "By (parent' or guardian's signature), parent (or guardian) for minor child."

Resources

• For more information go to the official IRS website, Forms and Publications and Select Pub. 929 Tax Rules for Children and Dependents

[KateSez-]

on 11/20/2008 Excellent user friendly info.