Even survivor Social Security benefits paid to a minor child are potentially taxable income. The key word is "potentially": Benefits are only taxable if you have added income besides Social Security. Few children have enough added income to require paying taxes on their benefits. If they do earn enough, however, the IRS needs its cut.
The formula for measuring when benefits are taxable is simple. Take half your child's Social Security income and add it to her adjustable gross income. Add any nontaxable interest she earned. If the total comes to between $25,000 and $34,000 -- as of 2012 -- 50 percent of her benefits are taxable. Above $34,000, 85 percent of benefits are taxable. If you and your child both receive benefits, don't lump them together, even if the check is payable to you. Calculate the taxability of your child's benefits based on her benefits alone, not yours.
Getting the Facts
You don't have to keep a record of payments or figure out for yourself how much of each benefits payment belongs to you and how much to your child. The Social Security Administration sends out 1099s early in February showing the benefits paid to you and yours in the previous year, and identifying whose benefits, legally, they were. If your child does have earned income of her own, use the information from her W-2s and the 1099 to figure out if there's tax due.
If your child has taxable Social Security benefits, she -- or you, if you handle the paperwork -- can't use the 1040EZ. The taxes must be filed using the 1040 or 1040A. Report the net benefits and the taxable benefits separately. On the 1040A, they go on line 14a and 14b, respectively; on the 1040, it's 20a and 20b. You add the taxable benefits to your child's other taxable income and pay tax on it, the same as if it were wages.
If you think your child's benefits for the coming year will be taxable, you can ask the government to take withholding out. You use form W-4V to request 7, 10, 15 or 25 percent withholding -- no other options. If your child has an employer, you can ask the employer to withhold extra income instead. A third option is to pay estimated taxes every quarter based on how much your child has earned by that point in the year.
- Internal Revenue Service: Social Security and Equivalent Railroad Retirement Benefits
- Social Security Administration: Income Taxes and Your Social Security Benefits
- IRS: Publication 915 -- Social Security and Equivalent Railroad Retirement Benefits
- SSA: Withholding Income Tax From Your Social Security Benefits
A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.