Working Teenagers Must File Income Tax Forms

Minors with Earned and Unearned Income are Required to Pay Taxes

Jan 25, 2009 Alex Sharp

Even though parents claim teens as dependents, Uncle Sam expects everyone - including people under 18 - to pay tax on all of the money they make.

Teens depend on their parents to navigate the tricky world of taxes, and if they earned enough money to be of interest to the government, the government expects teenagers to file taxes along with everyone else.

Warn teens to watch for the important w-2 form from their employers. It might be given to them at work or mailed to them at home, and it is an absolute necessity to have when filing taxes. Parents should hold on to the W-2 forms or Schedule C forms for their teenagers.

Earned Income Taxes

Income is any money that comes in, but the IRS has different rules for how the money comes in. Earned Income is any money made while working. This can be money paid to a person, or money made from self-employment.

Teens who made money working for an employer will have a W-2 form that their employer is responsible for giving them. Teens who made money through self-employment will have to fill out a Schedule C form.

Unearned Income Taxes

Children who are under 18 must pay taxes on "unearned income" for a given amount which varies over time, so as always, check with a tax professional or the IRS. This income can be from savings account interest, investments that parents make on a teen's behalf, inheritance, or large monetary gifts. Alaskan minors are required to pay federal tax on the Permanent Fund Dividend if it exceeds the cut off limit. The government will apply the same tax rate to the child as they apply to the parents.

Gains Taxes on Items sold on Ebay and Yard Sales

If teens are making a large profit from selling used and unwanted possessions, either the teens or the parents will have to pay taxes on gains made. Because teenagers are in school, it is unlikely that they are spending enough time on Ebay for the IRS to consider it a business. Instead, the IRS will expect teens to pay gains taxes, just like the items sold in a yard sale.

Gains taxes means that a person profited off an item. If a person sells an old iPod for less than he paid, it is not going to be taxed. Most of what teens sell at garage sales/yard sales and on Ebay is not going to be sold at a profit.

Tax rules and the minimum amount that a teenager must make changes, so it is important to read the IRS forms carefully or use a professional tax service. The IRS tax site is searchable and informative.

The copyright of the article Working Teenagers Must File Income Tax Forms in Parenting Teens is owned by Alex Sharp. Permission to republish Working Teenagers Must File Income Tax Forms in print or online must be granted by the author in writing.

Uncle Sam Expects Teens to Pay Up

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