Teens & Taxes: If Your Teen Made This Much Money, They Need To File Taxes
Do you have a devoted young worker or budding entrepreneur in your household? If your teen earned income in 2022, they might need to file taxes this year.
Teens & Taxes: What Documents Does Your Child Need to File Taxes?
Find: 3 Things You Must Do When Your Savings Reach $50,000
You might be surprised to learn that the earned income thresholds for whether or not teens need to file taxes are exactly the same as they are for adults under age 65. If your teen is a dependent with a gross income of $12,950 or more, they will need to file a tax return.
What If My Teen Worked a Side Gig?
If your teen worked a side gig, including one where they were paid as a 1099 contractor instead of as a W-2 employee, they must claim that money on tax returns if their net income exceeded $400. Your teen will need to file a Schedule SE with their 1040 tax form and pay self-employment taxes on that income.
If they earned $600 or more from any single source, your teen should receive a 1099-NEC form from the company that contracted the work.
What If My Teen Sold Products Online?
If your teen had an online shop or sold items through Facebook Marketplace, they will need to declare that income. As of the 2023 tax year, payment platforms like PayPal and Venmo will issue 1099-K forms to people who receive payments of $600 or more for “goods and services” sold. Prior to tax year 2023, sellers were responsible for tracking this income and reporting it on their own.
There is an exception to the rule. If your teen decided to help you clear clutter by holding an online garage sale and selling used items, they don’t need to declare any income if they sold items for less than their original purchase price. However, in the event they ransack your attic and sell their old Ty Beanie Baby collection or collectible Star Wars LEGO sets that appreciated in value, they’ll have to pay capital gains taxes on the profit.
But let’s face it — owing taxes on a $1,000 Ultimate Collector’s edition Millennium Falcon LEGO set would be a nice problem for you and your teen to have.
When To Get Professional Tax Help
If your teen worked a gig in 2022, it might be wise to speak with a tax expert specializing in small businesses and independent contractors. The pro can help calculate any expenses your teen might be able to deduct from their income to reduce their tax bill.
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This article originally appeared on GOBankingRates.com: Teens & Taxes: If Your Teen Made This Much Money, They Need To File Taxes
