William Byrnes' Tax, Wealth, and Risk Intelligence

William Byrnes (Texas A&M) tax & compliance articles

Is Your Child Required to File a Tax Return?

Posted by William Byrnes on May 16, 2014

2014_tf_on_investments-mChildren are potential taxpayers too!  That is the message from the IRS in Tax Tip 2014-38.  A child may be required to a federal tax return, or if a child can not file his or her own return, then the parent or guardian is normally responsible for filing their tax return.

Here are 4 tax facts from the IRS that about a child’s investment income:

1. Investment income normally includes interest, dividends and capital gains. It also includes other unearned income, such as from a trust.

2. Special rules apply if a child’s total investment income is more than $2,000. The parent’s tax rate may apply to part of that income instead of the child’s (lower) tax rate.

3. If a child’s total interest and dividend income was less than $10,000 in 2013, the taxpayer may be able to include the income on the taxpayer’s tax return. If the taxpayer elects this choice, the child does not then file a return. See Form 8814, Parents’ Election to Report Child’s Interest and Dividends.

4. Children whose investment income was $10,000 or more in 2013 must file their own tax return. File Form 8615, Tax for Certain Children Who Have Investment Income, along with the child’s federal tax return.

Starting in 2013, a child whose tax is figured on Form 8615 may be subject to the Net Investment Income Tax. NIIT is a 3.8% tax on the lesser of either net investment income or the excess of the child’s modified adjusted gross income that is over a threshold amount. Use Form 8960, Net Investment Income Tax, to calculate this tax.

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