Self Employment Tax for Minor Children

Taxes are not usually associated with children. According to the IRS, however, children can also incur tax liability, and any child who earns an income greater than the federally allowed amount must file an income tax return. If your child is entrepreneurially inclined he may also be responsible for paying self-employment tax.

A summer job or lemonade stand can come with tax responsibility, regardless of the wage earner's age or intentions. The IRS requires any minor earning more than $5,700 in a given tax year to file an income tax return. If, for example, your 16-year-old son mows lawns during the summer and generates $5,800 he must file an income tax return, in addition to any taxes that are withheld from his paycheck.

Parents may be surprised to learn that the IRS holds their child responsible for filing her own tax return. Minors are also expected to pay any tax penalties associated with their earned income. In instances when the child is too young to read or write, or otherwise physically unable to file her own return, a parent or guardian can submit the return on the child's behalf.

Unlike self-employed adults, children who have their own business do not usually pay this type of tax. If, however, a minor earns income that accounts for more than 50 percent of his total support, including rent, food and clothing, than that child is responsible for paying self-employment tax. As of 2011, the self-employment tax rate is 13.3 percent on the first $106,800 earned, 10.4 percent of which goes toward Social Security and 2.9 percent for Medicare.

If your child has a prosperous business and must pay self-employment tax she can follow the same procedure as a self-employed adult. A 1040, 1040A or 1040EZ form can be used to report your earned income. Your child may want to file as a sole proprietor, in which case, a Schedule C or C-EZ may also be used. If you anticipate your child earning self-employment income during the following tax year, you should refer to the IRS website for information about quarterly tax liability.