95. Tax Filing Requirements for Your Dependents: When Children Need to File Returns

Send us a text

We decode the confusing rules around when children and dependents need to file tax returns, covering both W-2 employment income and 1099 contractor payments.

• Children with W-2 income under $14,600 (2024 standard deduction) don't need to file unless they want to claim a refund
• Parents can still claim college students as dependents if providing over half their support
• 1099-NEC income has a much lower threshold - children must file if they earned over $400
• Self-employment taxes (15.3%) apply to 1099 income even when income tax doesn't
• Always track and deduct business expenses to reduce taxable profit on 1099 income
• Common deductions for teen workers include certification costs, mileage, and equipment

If you found this episode helpful, we would really appreciate if you would share it with somebody that you know.

Create a STAN Store - Click here to try it out!

Here's where you can find us! Follow along on Instagram for lots of free content for business owners daily!



Shop our business guides!

Our Instagram Page

Our family page

Episode Transcript

Speaker 1 (00:00):
Long story short if they do have a 1099, not a W-2,
then they do have to file thetax return if it's over $400.

Speaker 2 (00:14):
Welcome to what your CPA Wants you To Know.

Speaker 1 (00:18):
Tax and accounting help can be expensive, so we've
created this podcast to helpguide you through it all and
make you feel like you have aCPA in your back pocket.

Speaker 2 (00:28):
I'm Carson Sands.

Speaker 1 (00:29):
And I'm Taryn Sands.

Speaker 2 (00:31):
I'm a CPA with over 10 years of experience helping
people start and grow theirbusinesses.

Speaker 1 (00:37):
And I'm an MBA with a specialization in marketing and
entrepreneurship.
Taxes suck and we want to makesure you don't pay more than
your fair share.

Speaker 2 (00:47):
We're here to share everything your CPA wants you to
know in a fun and easy tounderstand way.
Let's get started.

Speaker 1 (00:55):
Let's do it.
Today's episode comes from aquestion that we've been
receiving actually quite a lotthis year, and I realized we
didn't have an episode aboutthis.
So today we're going to talkabout filing a tax return for
your child or a dependent onyour tax return and what the

(01:16):
rules are for that.
So we've been getting a lot ofclient emails stating that maybe
an older child in high schoolor college has received a 1099
or a small W-2 and the parentsaren't sure if they need to file
a tax return and what the rulesare, and then also questions on
if they can continue to claimthem as a dependent once they go

(01:39):
to college.
So we're going to touch on allof those things quickly because
it seems like a lot of peoplehave the same question.

Speaker 2 (01:46):
Great yeah, we can answer all of those questions
and more.

Speaker 1 (01:49):
So it's not something that Carson often thinks about
because it seems pretty simple,but I understand the confusion
and let's talk about it firstfrom a W-2 standpoint.
So if your kid gets a W-2,because as always, it depends on
what they have and thethresholds and all of that so
first let's say your child getsa W-2.

(02:10):
They're working at their firstjob.
What are the rules for that?

Speaker 2 (02:14):
So for 2024, the standard deduction is $14,600.
That's an important numberbecause it means if their W-2
was under that the total in boxone of their W-2, then they
don't have to file.
Now they might still want to.
The next box you want to lookat is box two, because that's
where the withholding is.
If that's a significant amount,it might be worth filing a tax

(02:37):
return, because that is wherethe employer withheld taxes for
income tax purposes.
Well, if they're under $14,600,then they don't have to pay any
income tax.
So if they withheld 200 bucks,well, yeah, I mean jump on
TurboTax, knock out a quick taxreturn form and you'll get that
full $200 back.
But if there's $10 in there or,even better, hopefully zero,

(03:03):
well then don't file one,because you don't have to file
one.
They're not going to get anymoney back or they're only going
to get 10 bucks back.
It's not worth your time.
So, yeah, just let it go andmove on.

Speaker 1 (03:10):
So if they have a W-2 below the standard deduction,
you don't have to worry about it.
Though, if they did have quitea bit of withholding, even a
couple hundred dollars, thatthey want back, you can file to
get the refund, and we recommendjust doing that on TurboTax.
So so simple.

Speaker 2 (03:28):
It's really easy TurboTax app or any of them,
taxact actually.
Hey, let's support some of theother people besides Intuit, so
TaxAct any of them, most of them.
You can take a picture withyour phone and upload it into
the app and it willautomatically fill out
everything for you.
So, hey, we love making money,but this isn't one thing that
y'all really need to hire us for.

Speaker 1 (03:53):
Absolutely not.
You can totally do it.
Now the second question on thatis okay.
So let's say they did and theyfiled a tax return, can you
still claim them as a dependent?

Speaker 2 (03:57):
Yes.
So you're saying if they madeover $14,600, then yes, you do
have to file a tax return andyes, you can still claim them as
a dependent.
I mean, certainly if they're aminor, but even if they're over
18, if they're still in college,and the way that that's
determined is if you'reproviding over half of their
support.
So even if they're 19, butthey're going to college and

(04:18):
you're covering yeah, I meansure, they made $15,000 on their
W-2, so they have to file, butyou're covering over half of
their expenses, then yes, youcan still claim them.
You get a $500 credit for that.
It's nothing to write homeabout, but you get that.
And also you can claim theexpenses for their college to

(04:38):
get the credits.
If you're claiming them as adependent and you're the one
actually paying those collegefees, you can claim that as well
.
Now, that is a bigger benefit.

Speaker 1 (04:46):
So that's how you would do it if your child has a
W-2, but it is different if theyreceive a 1099 for contract
labor.

Speaker 2 (04:54):
Very different.
If you get a 1099-NEC, then thethreshold is only $400.
Under that you get a $300 1099.
Well, first of all, theyshouldn't have sent one, because
they're not supposed to if youmake under 600, but sometimes
people do.
But if it's $400 or more ofself-employed income, you're
supposed to file a tax return toreport that you still won't be

(05:17):
subject to income tax if you'rebelow that 14,000 or 15,000 for
2025 standard deduction amount,but you still have to pay
self-employment taxes.
So let's just say you make aflat $1,000.
Well, you'll have $153 inself-employment taxes to pay on
that, even though you don't haveto pay any income taxes.

Speaker 1 (05:37):
So fun.

Speaker 2 (05:38):
Very fun.
There are some exclusions forthat, for doing work for your
church.
I know, for example, when I wasin high school I played guitar
for a church and they paid me alittle bit and it might have
been over $400, but I was exemptbecause I was working for a
church.
But there's not very manyexemptions.

Speaker 1 (06:00):
Mostly, if you get that 1099 and it's over $400,
you have to file.
And then the other question,follow-up question for that was
okay, my kid made $800, but theyhad more than that in expenses
or they had a bunch of expenses.
So how does that play into it?

Speaker 2 (06:12):
So in that case they won't end up getting taxed on
that, but they still have tofile to prove that they didn't
have profit.

Speaker 1 (06:19):
So they're just getting taxed on the profit.
So the self-employment tax isapplied to the profit.
So if really they made nothing,then they're not going to have
to pay anything.

Speaker 2 (06:28):
Right, that's a great idea.
I mean, that's a great point.
Let's go back to my $1,000example.
You get $1,000, 1099.
You go and file, but you didhave expenses, so you're not
going to have 153 inself-employment taxes.
Now you're going to have $1,000worth of expenses and now you
have zero profits, so there'szero tax.
But you still have to file atax return because the IRS
doesn't get a 1099 for yourexpenses, they only get a 1099

(06:51):
for your income.
So until you file your taxreturn, they assume that all you
had was a thousand of incomeand zero expenses.

Speaker 1 (06:58):
So, long story short, if they do have a 1099, not a
W-2, then they do have to filethe tax return if it's over $400
, which makes no sense to me,considering you only send them
out if it's over $600.
So, anyways, also make sure toput expenses on there.
If they had mileage or anythinglike that, it definitely adds

(07:21):
up and it would reduce whatthey're paying in
self-employment taxes.
So you are able to add those inon the tax return, but you have
to file the tax return to addthose in.

Speaker 2 (07:30):
Right, there's almost no situation where you have a
1099 and absolutely no expenses,I mean, unless you're working
from home, I guess.
Even then you might have homeoffice.

Speaker 1 (07:38):
And then you have home office expenses maybe, but
absolutely there's always almostalways some mileage or
something.
So just make sure that you areadding anything that they had in
there.
I know a lot of kids do likereffing or being a lifeguard or
something, and then they have toget certifications on all of
that.
So make sure that you deductanything like that that they had
to pay for out of pocket tomake that 1099 income.

(08:02):
I think that wraps it up forthose questions.
Those are some really goodquestions and, as always, it
depends on the situation.
If you found this episodehelpful and you think somebody
else could use it, we wouldreally appreciate if you would
share it with somebody that youknow.
And until next time, thank youso much for listening to.

Speaker 2 (08:20):
What your CPA Wants you To Know.

Speaker 1 (08:22):
Podcast.

Speaker 2 (08:29):
This podcast is intended to provide accounting
and tax information foreducational purposes only.
All tax situations are uniqueand should be handled with the
assistance of a tax professional.