Tax Returns for Minors

You may be surprised to learn that your child is a separate taxpayer, even as a minor. If your child has enough income, he or she has an obligation to file a return and pay the tax. Here’s a quote from a recent edition of IRS Publication 929, Tax Rules for Children and Dependents:

Generally, a child is responsible for filing his or her own tax return and for paying any tax, penalties, or interest on that return.

When the IRS says “generally,” it often means there are exceptions, and that is the case here. We’ll look at three issues: who prepares the return, who signs the return, and who pays the tax if any is owed.

Who prepares the return

If the return isn’t complicated, and your child is old enough to read and follow instructions, filling out a tax return could be a good learning experience. Naturally, you can help your child prepare the return, or you can handle the task entirely yourself. In fact, the IRS expects you to do so if your child isn’t up to the task:

If a child can’t file his or her own return for any reason, such as age, the child’s parent, guardian, or other legally responsible person must file it for the child.

At one time it was possible to report the child’s income on your own return if it consisted entirely of dividends and interest, but Congress eliminated this alternative for tax years 2018 through 2025, and subsequent legislation may make this change permanent.

Who signs the child’s return

Your child doesn’t have to be of legal age to sign an income tax return. Any child old enough to sign his or her name can do this. There’s a catch, though. If you sign the return and the IRS ends up having questions, they can deal directly with you. If your child signs the return, there will be limits on what they can discuss with you and what actions you can take to resolve any issues, at least until you have a valid power of attorney to act on your child’s behalf.

There’s a middle ground. Your child can sign the return but show you as the “third party designee” using a space provided for this purpose near the signature line of the return. That gives you limited authority to deal with the IRS on the tax return without a power of attorney.

For greatest convenience in dealing with any issues that may arise on a minor child’s tax return, the easiest solution is for the parent to sign the tax return.

Who pays the tax

As indicated in the quote at the top of this page, paying the tax (and interest and penalties, if applicable) is the child’s obligation. For example, if your child owes tax because of income generated by a custodial account (UTMA or UGMA account), it would be appropriate to take money from that account to pay the tax, because the child (the owner of the account) owes the tax.

Note: You can pay income tax for your child from your own money, of course, but generally when you do that you’re making a gift to your child.

There is an exception to this general rule. If the law of your state gives you the right to receive income from work performed by your child, and you actually do receive the income, the IRS says you may be liable for the tax. The income is still reported on a tax return for the child (not on your own income tax return), but if you receive the income and the child doesn’t pay the tax, then you’ll have to pay.