When embarking on starting a family, is it so crass to wonder if your new bundle of joy might also be your ticket to financial freedom and independence? Sure, there are lots of cautionary tales of child actors and chess prodigies — but what about those kids who manage to make their college tuition plus a car down payment from a good night during "Jeopardy!" Kids' Week? Or that eager kid from down the block who seems to be making bank mowing lawns? Is it so terrible to wish your child a cash machine, on top of all those run-of-the-mill desires for health and happiness?
Of course not! Doesn't the American dream involve something about your kid making you fabulously wealthy? I'm sure that's written somewhere. But do know that, while the dough piling up on your doorstep might be great, it doesn't make it any less subject to Uncle Sam ... in general.
Here are the quick and dirty rules about filing taxes for children. And like all quick and dirty tax rules, that means that there are loads of exceptions and special circumstances that might need to be taken into consideration. So while we can give you the highlights, you'll need to check you particulars with the IRS.
In general, minors need to file a tax return if they have earned income over $6,200. Earned income isn't necessarily lemonade stand profits; it's any wage or salary paid by an employer – say, your kid's pay for modeling adorable outfits for your local toddler boutique's ads. But here's the thing: Even if your child is bringing in less than $6,200, it might be a good idea to file a tax return anyway — if taxes were withheld on the paychecks, he or she will be due for a refund.
Now if your kid is making unearned money — like interest or dividends — it's a different story. If your son or daughter is flush with more than $1,000 in unearned income, you'll definitely need to file a return. (There are circumstances in which you could just include it on your own tax return, but that might mean you find yourself in a higher tax bracket.)
And don't think that Junior is going to be thrown in the slammer if he or she dodges their taxes. If kids are not old enough to understand taxes or how a return works, the responsibility lies with the parent or guardian.