It is the parents’ responsibility to ensure that their child grows up into an individual who is self-reliant and independent. The legal compulsion of filing your child’s first income tax return is one big step towards achieving that. It is not a process that is taught by teachers in schools. It’s not something that allures the children on T.V into doing it in the best possible manner. Most children do not even know what income tax implies, let alone understanding the ways to deal with it effectively and efficiently.
Therefore the responsibility rests in the hands of the parents. They should seek proper guidance and evaluate the requirements. They should also ensure that children can take up this responsibility in the future.
A few basic rules have been stated below to determine your child’s first income tax return and make things easier on your end:
Why do children need to file an income tax return?
- IRS stands for Internal Revenue Service that makes it mandatory to file a tax return if the income of the child is beyond a certain amount.
- Recovering taxes is made possible by filing a tax return in case the employer of your child has withheld them.
- It helps to instill good financial habits in your child and make them aware of the rules and regulation that will help them in the future in dealing with finances.
Important points parents should keep in mind before filing their child’s first income tax return
- Responsibility of the children– Children, even before reaching the age to vote, can register and sign their income tax returns. In case the child cannot do so, it becomes the parents’ responsibility to get the job done on their behalf.
- Skip filing a different tax return-There is no need to find a separate tax return if the child income consists of only interests and dividends. Parents can include that in their tax return.
- Self-employment tax- Children who earn above a certain amount are entitled to pay self-employment tax even if he or she doesn’t have to pay income tax.
Important points parents should communicate with their children
- Paycheck stub- Discuss the paycheck stub when your child starts earning. Talk to them about social security and Medicare and the benefits that tag along.
- Self-employment income- If the self-employment income is beyond $400, it calls for a discussion with the children.
- Signing- It is essential for the children to learn to sign their documents. Explain to them what perjury means and how honesty is significant in the process.
- IRS- Discuss with children the obligations related to the IRS and how seriously how they are to be taken.
Thus, educating the children about their responsibilities and walk them through the process when the time comes. In case you need financial guidance, you can always seek help from a professional.