Who has to file taxes?
Generally, a child must file a return and pay tax due. But the amounts that trigger the filing depend on the type of income:
- Earned, generally characterized as a salary, wages or tips. It also includes taxable scholarships and fellowship grants.
- Or unearned, which includes investment interest or dividends, capital gains, unemployment benefits and some trust distributions.
The amount of each type of earnings that triggers a young person's filing requirement is adjusted each year for inflation and is calculated using a formula that factors in the annual standard deduction amount.
Older individuals and persons of any age who are blind also must make some extra calculations to determine if they need to file a Form 1040.
Don't forget about self-employment earnings, whether you're a teenager running a neighborhood lawn service or an adult with a 10-person manufacturing operation. This money counts toward determining if you have to file a return, regardless of whether it was your sole source of income or just an occasional side job to make a little extra cash.
If your annual gross self-employment income is at least as much as the income level for your filing status, you have to send in a Form 1040 and Schedule C or Schedule C-EZ reporting your earnings.
You also must file a Schedule SE to pay self-employment tax if your net earnings exceed $400.
When it pays to file
For those few who don't legally have to file, it sometimes pays to send in a return anyway.
This is the case for individuals who don't earn much but might be eligible for the earned income tax credit. This benefit is available to qualified individuals even if they owe no tax, meaning they would get money back from the federal government. Many people think the credit is available only to parents. It's not. But the credit amount is greater for eligible low-wage taxpayers with children.
Plus, the IRS says that most individual taxpayers are due a tax refund. But those taxpayers must send in a Form 1040 or Form 1040A or Form 1040EZ to get that cash.
You can check out the filing requirements section of IRS Publication 17 or the instructions for your tax return for more details on specific filing circumstances.