Should Your Child File an Income Tax Return?

Do children have to file an income tax return? If a child has earned more than $800 in investment income, or had a wage income of more than $5000, the answer is "yes." According to Kiplinger, for incomes less than $5000, it's not necessary to file with one exemption: if your child has both investment income over $250 and earnings from a job, she must file a tax return regardless of her income.

My children all have part time jobs since the time they were 12. With income received from odd jobs and yard work, it wasn't necessary to fill out returns since their income was far less than the $5000 limit. However, once our older son began working at McDonalds and drawing a regular pay check, we decided he would benefit from filing a tax return. By filing a return, he would be entitled to a refund of state and federal taxes that were being automatically deducted from his paychecks.

When our kids were still under the age of 18, filling out tax forms was really quite easy. All we needed was copies of W2 forms from their employers, the child's 1040-INT forms for interest and dividend income, and a 1040 EZ since their investment income was less than $250.

The instructions for the 1040EZ was pretty self explanatory. Since I use a Turbo Tax program for our household taxes, I just used the same program to start an individual return for each of our wage earning children. We simply followed the instructions, had the children sign their returns and then popped them the mail.

If your child is a dependent college student, filing a tax return is more involved. In addition to the above forms, you will also need all his receipts related to his education and tuition, and yet another form called a 1098-T. This form is issued from your child's university and reflects scholarships and grants received, and actual tuition expenses incurred.