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How much tax return for a child

how much tax return for a child

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Adults may choose to pay taxes for their children, but the paid taxes will be counted as a gift. Federal law taxes all gifts made of over $13,000 per year as income. This can be a valuable teaching opportunity for children regarding the importance of savings. If the child has earned the money without paying tax through withholding, he will need to save enough money to cover tax obligations before the annual deadline.

Record Keeping for Children

The jobs that most children hold -- running lemonade stands, holding bake sales, babysitting, lawn work and other jobs - are often paid in cash. Particularly industrious children may earn enough money from these pursuits to owe tax, but will sometimes skimp on the record-keeping. While the IRS rarely pursues children for owed taxes, particularly when the amounts involved are low, children who don't keep adequate records can be snared when their parents are audited. Encourage children to keep records through spreadsheets and with other methods.

Filing a

Tax Return

Tax preparation is already exhausting for adults. It's a good habit to teach children to learn how to file their own returns. Only eccentrics enjoy paying taxes, but the IRS makes the process relatively simple through the Internet. The IRS provides a web form asking a series of questions that makes the procedure understandable to children with sufficient literacy skills. Stay nearby while your children fills out the forms at the appropriate time so you can respond to any questions he might have about the process.

Income Through Dividends and Interest

Children who earn an income through dividends paid through stock ownership or interest earned through savings accounts, bond ownership or similar securities can pay their taxes in a form attached to the tax returns of their parents. This form is called Form 8814, which covers that income and capital gains taxes owed on custodial accounts in the name of each child. If the child only earns income through those sources, Form 8814 is sufficient to cover her tax liability.

Category: Taxes

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