Note: The content of this video applies only to taxes prepared for 2010. However, the text below has been updated to reflect the current tax year.
Hello, I'm Sara from TurboTax, with some important information for parents.
Does your dependent child earn money at work or own investments? If so, it may be necessary for them to file an income tax return this year. All taxpayers must report their income if it exceeds the sum of their exemptions and standard deduction.
However, children are given a little more flexibility in choosing how to report income to the IRS. It usually depends on whether they earn the income from work or if it's related to investments, such as interest in a savings account.
If your child earns more than $6,100 (in 2013) from working, or more than $950 from investments, then their total income must be reported. There are two ways your children can do this:
- File a separate tax return of their own.
- Or if the income is solely from interest and dividends, you can just add those amounts to your own tax return and pay the tax on their behalf.
Two things you should always keep in mind, though:
- First, if your child is due a tax refund, the only way they can get it is by filing a separate return.
- And second, before you make the decision to include their interest and dividends on your tax return, check to see if less tax is due when a separate return is filed since you're probably subject to higher rates of tax.
For more information about income taxes, visit TurboTax.com.