Do Teenagers Have to File Taxes?

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Taxes can be confusing and frustrating. There’s so many different tax laws it’s hard to get it straight. The following is some information to help teenagers find out if they have to file taxes:

A teenager who is or will be claimed as a dependent on his or her parent’s taxes that year only has to file an income tax return if the teen made more than the standard deduction amount for a single filer, which is $6,300.

A teenager who is a dependent also has to file taxes if the teen had any investment income (such as taxable interest from an investment, ordinary dividends or capital gain distributions) over $1050.

Do Teenagers Have to File TaxesThat being said, a teen who did not make more than $6,300 but had a job that withheld federal taxes from each paycheck might want to file a tax return anyway in order to get those taxes refunded.

Children can be claimed as a dependent if they meet at least one of the following requirements:

  1. They are under 19 years old at the end of the year
  2. They are under 24 years old and a full-time student at the end of the year
  3. They are permanent disabled at any age

What is Self Employment Tax?

The one exception to the rule that teens who make under $6,300 don’t have to file a tax return is if the teenager earns at least $400 through self-employment. The IRS defines self-employment as a profession in which a person offers their services to the general public. These people are considered independent contractors.

When it comes to online jobs, self-employment usually refers to money you earn through your own online business, freelance service, skilled trade, online survey sites and etc. The self-employment tax rules apply no matter what age you are, according to the IRS website.

If you earned this money on from a website or company run by someone else, you will know if you earned over $400 dollars in self-employment because the company that paid you will send you a 1099 form, labeled Misc & Independent-Contractors, at the end of the year stating that you did so and will tell you exactly how much you earned. If you receive this form in the mail. Hold onto it because you’ll need it to file your taxes.

How Much is the Self Employment Tax Rate?

The self-employment tax rate is 15.3% on net earnings in 2016. If you make over a certain amount you may have to pay estimated tax, which is quarterly payments throughout the year. Generally, you have to pay estimated tax if you expect to owe $1,000 or more in self-employment tax at the end of the year.

If you fail to pay your estimated tax payments you may be subject to tax penalties at the end of the year. This penalty is waived if you paid at least 90% in estimated tax that year or you paid 100% of your estimated tax the prior year, whichever is smaller.

The penalty may also be waived if you failed to pay the estimated tax for the following reasons:

  1. Your failure to pay was due to a disaster, casualty or other unusual circumstance.
  2. You retired or became disabled that year and underpayment was due to to reasonable cause and not willful neglect.

How Do I File Taxes?

The IRS states that teenagers should file their own taxes but if they cannot do so for any reason, their parent or legal guardian is required to do so on their behalf. Taxes can be filed online for free, on sites like H&R Block or using the IRS’ free tax software Free File, or they can be prepared by a tax professional for a fee.

For more information about personal finance for teens, check out our article Teens and Money.

Sources:
Department of Treasury: Exemptions, Standard Deduction, and Filing Information: https://www.irs.gov/pub/irs-pdf/p501.pdf
IRS: Frequently Asked Questions: https://www.irs.gov/Help-&-Resources/Tools-&-FAQs/FAQs-for-Individuals/Frequently-Asked-Tax-Questions-&-Answers/Filing-Requirements,-Status,-Dependents,-Exemptions
IRS: Estimated Taxes: https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Estimated-Taxes
IRS: Independent Contractors: https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-Defined
Investopedia: Kids First Income Tax Return: http://www.investopedia.com/articles/taxes/08/kids-first-income-tax-return.asp

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