Child receives a 1099-MISC in 2021

[klaus-libertus]

Versions of this question have been answered before, but I wanted to check for 2021 - as laws do change.

My 12-year-old child received a 1099-MISC for 2021 listing "Other Income" in box 3 as $665.00 (from participating in research studies). No federal income tax was withheld.

1) Do I have to report this on my tax return (where I claim the child as dependent)?

2) Does my child have to file a tax return - Fed OR State?

My current understanding is that 1) we do not include this in OUR return and 2) my child does not have to file either Fed or State returns (our state is PA). Please confirm that this still holds for 2021.

Thank you all for your help and insights. 

[DianeW777 · Accepted solution]

No, you do not report this on your tax return even though you claim your child. As far as the federal return, the amount is in box 3, so there is no tax on it unless your child has other income to report.

Yes. In PA, the return must be filed for your child.  PA requires a tax return when $1 of calculated tax is produced even if tax forgiveness might apply. The tax rate in PA is 3.07% which hasn't changed in many years and that means that $33 dollars creates tax of $1.00. If you as a parent qualify for tax forgiveness in PA, then your child will likely qualify as well. 

PA Tax Forgiveness - Provides the Eligibility Income Tables as well.

• A dependent child may be eligible to claim tax forgiveness only if he or she is a dependent on the PA-40 Schedule SP of his or her parents, grandparents, or foster parents and the child’s parents, grandparents, or foster parents are eligible for tax forgiveness. Dependent children whose parents, grandparents, etc. are not required to file a PA-40 Individual Income Tax Return but would qualify for tax forgiveness if they were required to file are also eligible for tax forgiveness. 

[klaus-libertus]

Thank you for that detailed answer. One clarification questions:

Does my child file his own PA return for this income, or do we include his income on our return (even if we exclude it on the Fed return)? 

If we include him on our tax return, does TurboTax offer an option to do this (exclude on Fed but include on State)?

Thank you.

[ErnieS0]

Pennsylvania does not have a "kiddie tax" law. Everyone who earns more than $33 must file their own return (except married couples filing together).

Who must file a Personal Income Tax return?