Documentation for Filing Taxes With Children
Children are not exempt from taxes. Unfortunately, the IRS taxes children on income they earn during the year. The tax paid by children is based on the same tax rates used for adults. The tax brackets of children may be lower only if the child happens to earn a small amount of income. In some cases, parents may file for the child. The documentation for children who file taxes is similar to the forms adults need when filing their own taxes.
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Requirements
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A child must file a tax return when he earns more than $5,700. Unearned income, such as investment income, is subject to a lower threshold of $950. The IRS requires a child to file Form 1040. This form would be filed by the child and signed in the same manner as an adult would file and sign a tax return. Any tax due on the income would be paid by the child.
Significance
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Children may not be able to sign a tax return. In these situations, the IRS allows parents to fill out and sign the child's tax return. There must be a tax return for each child that is required to file taxes. The parent can take responsibility for making sure any tax due for the child is paid when he fills out and signs the tax return for the child. Additionally, the parent may speak for the child regarding any tax matter regarding the return when he is filing on behalf of the child.
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Disadvantage
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Children can be taxed at the parents' tax rate on investment income. Parents should use IRS Form 8814, Part I, to include interest income or dividends that exceed $1,900 per year. The money earned in excess of this amount is subject to the parents' higher tax rate. This may leave the child with less money than he otherwise would have if he was allowed to file and pay taxes under his own tax rate.
Consideration
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While your child may wish to have a job and start earning income, you may wish to restrict certain income from being earned by the child until he is old enough to take on the responsibility of filing and paying taxes. If he under-reports tax or fails to pay tax, you could be held liable, as a parent, for the payment of both the tax and any penalty on the amount owed.
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