17
Jan
Jan
One of the most frequent questions we get every year is, “Is my dependent required to file a tax return?” It’s always a complicated response because it requires us to ask more questions to find out the truth. In an effort to help our clients with dependents navigate this easier, these are the filing requirements:
- They have earned income (like W2s) over $12,950.
- They have unearned income (such as interest, dividends, and other investment income) of $1,150 or more. This is where the Kiddie Tax rules start and the parent’s return needs to be completed first as the dependent return will have a portion of tax based on the parent’s tax rate.
- They have net self-employment income (maybe from babysitting or refereeing a youth sport) of $400 or more. 1099-MISC or 1099-NECs have a filing threshold of $600 so your dependent will not necessarily receive one of those forms if they are under that limit, but…the IRS requires all US residents to report their worldwide income. So if they make $400 doing odd jobs, even if paid in cash, they are required to file a return.
- They have gross income more than the larger of $1,150 or earned income (up to $12,550) plus $400. Generally in these situations a return is filed to get any withholdings refunded as no tax is assessed to the return.
If this is all still clear as mud, don’t worry, we’ll help you figure it out.