Should your teenager file a tax return? Here are ten situations when a teenager may need to prepare a tax return.
-
Your teenager received a W-2 and federal income tax was withheld. Look at your teenager’s W-2 Box 2 Federal income tax withheld. He or she may be due a refund of that money.
-
Your teenager received a form 1099MISC and Box 7 Nonemployee compensation has an amount in it. Your teenager has been classified as an independent contractor and needs to file a tax return to pay self-employment tax. Read more about worker classification of teenagers at TeensAndTaxes.com.
-
Your teenager received more than $950 in investment income from interest and dividends in a year. Investment income greater than $950 is taxed.
-
Your teenager had a mix of earned income from a job or a business and investment income. He or she may owe tax on the combined income.
-
Your teenager started a business and made a profit. He or she may need to pay income tax and self-employment tax. Visit my website MicroBusinessForTeens.com if your teenager has questions about starting or running a micro business.
-
Your teenager started a business and lost money on it. He or she may wish to file a tax return to reduce their taxes in this year or future years.
-
Your teenager received a form 1099B from a broker, bank or mutual fund company because he or she sold stock or a mutual fund and had a gain on the sale. Your teenager should file a tax return and include the stock sale on a Schedule D.
-
Your teenager sold stock or a mutual fund and has a loss on the sale. He or she may wish to file a tax return to reduce their taxes in this year or future years.
-
Your teenager had earned income from a job or a business and wishes to open a Roth IRA.
-
Your teenager received several W-2s, but did not have federal income tax withheld on all the W-2s (look at Box 2). They may not have had enough tax withheld and may owe income tax.
If any of these situations happen to you, read more about teenagers and taxes at TeensAndTaxes.com. Then consult a local CPA to help your teenager file a tax return.
Carol Topp, CPA
