The IRS does not exempt anyone from the requirement to file a tax return based on age, even if your child is declared as a dependent on your tax return.¹
Your dependent children must file a tax return when they earn above a certain amount of income.
Dependent children with earned income in 2020, in excess of $12,400 must file an income tax return. This threshold may change each year (in 2019 it was $12,200), so please reach out to us so we can assess your individual situation.²
Even if your child earns less than the threshold amount, filing a tax return may be worthwhile if he or she is eligible for a tax refund. The standard deduction for a child is different from that of an adult: It is the greater of $1,100 or earned income plus $350, with the maximum equal to the regular standard deduction (same as 2019).³
The rules change for unearned income, such as interest and dividend payments. When the annual total of unearned income exceeds $1,100, then a return must be filed for your child. If his or her unearned income only consists of interest and dividends, then you can elect to include it on your own return and combine it with your income, though it may result in higher income tax to you.
If you decide to prepare a separate return for your child, the same reduced standard deduction rules detailed above will apply.
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1. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2020 FMG Suite.
© Copyright 2020 Thomson Reuters.
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisors. Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability and fitness for a particular purpose.