When is a Teen Required to File Federal Taxes?

| January 12, 2011

Parents have a difficult enough time raising teens without having to worry about whether or not their teen’s earnings or investment income must be claimed on taxes.

Under certain circumstances, teens who have worked and earned income during the year must file taxes. Although it is drilled into taxpayers’ heads that everyone who earns money must file taxes by April 15th, there are occasions when teenagers are exempt and don’t have to file.

The Changing Tax Laws

Because tax laws change from year to year, it is recommended that every reader visit the Internal Revenue Service website for the latest updates. Listed below are the government’s requirements when it comes to teen income and filing taxes. The determining factor isn’t whether or not a teen has earned income, but how much income and where the income was derived.

The Internal Revenue Service looks at two main factors for determining whether or not a teen should file federal income taxes:Teen and Taxes

  • How much income the teen has earned during the tax year. Earned income is defined as income derived from salaries, wages, tips, and professional fees. It also includes taxable scholarship and fellowship grants.
  • How much unearned income the teen has accumulated during the year. Unearned income includes investment income, dividends, taxable social security benefits, unemployment benefits, annuities and distribution from a trust.

Requirements for Filing Taxes

  1. If a teenager’s investment income exceeds $900 he must report the earnings to the Federal government. The first $900 is not taxed, but anything exceeding $900 is. The rate of taxation depends on the type of investment income. According to the experts at TurboTax, the taxation rate is 10% unless it’s a qualified dividend, which is taxed at a rate of 5%.
  1. If a teenager earns more than $5,450 in a single year, he must report the earnings to the federal government. While filing for earnings less than $5,450 is not required, it may be recommended if the employer took withholdings from the teen’s paycheck. Filing taxes is the only way to recoup that money.
  1. If the teen’s income comes from a combination of investment income and earned income and exceeds $900. The caveat is that of the $900 earned, if the investment income is at least $300 and the balance is earned income, which in combination brings the teen’s total earnings over the $900 threshold, the teen must file taxes. In other words, if the teen earns $300 in investment income and earns $400 in earned income, he does not have to file because the combination of the two do not exceed $900.

Visit the Internal Revenue Services website and download Publication 17, Your Federal Income Tax for Individuals. It has the latest information on how and when individuals should file taxes. While the document is not written specifically to cover the aspect of teen fax filing, pay particular attention to the “Do I Have to File a Return” portion under section one.

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Category: Taxes

About the Author ()

Felicia A. Williams is a wife, mother, freelance writer and owner of Tidbits and Stuff.

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