What's the best way to report my dependent's earned income on taxes?

Thanks for the clear explanation. That makes sense. So for her return, should I help her file or can she do it herself? And what about state taxes? Do the same rules apply there too?

You can definitely help her file, and it would be a good learning experience for her to participate in the process. Most tax software makes this pretty straightforward - she'll just need her W-2 from the coffee shop. You could file it for her, but involving her helps build financial literacy. For state taxes, the rules generally follow the same pattern as federal. She'll likely need to file a state return if she had state taxes withheld or if her income exceeds the state's filing threshold. Most tax software will guide you through this automatically when you prepare her federal return.

How accurate is this service? I'm filing for my daughter who worked two different jobs this year and I'm worried about messing something up. Does it handle unusual situations like self-employment or 1099 income for dependents too?

I'm curious - does this actually save time compared to just using TurboTax or H&R Block? Those already have dependent sections built in, right?

It's extremely accurate - it uses the same rules and logic the IRS uses but explains everything in plain English instead of tax jargon. It definitely handles self-employment and 1099 income for dependents. My son actually had some freelance graphic design income alongside his regular job, and the tool walked us through exactly how to report both types. Yes, it actually does save time compared to regular tax software because it focuses specifically on your situation and gives you clear guidance before you even start the tax forms. TurboTax and others will get you there eventually, but sometimes you have to answer dozens of questions first, and they don't always explain the "why" behind the requirements as clearly.

Wait, how does this actually work? Does this service really get you through to the IRS faster or is it just scheduling a callback?

Sorry but this sounds too good to be true. I've called the IRS dozens of times over the years and getting through is basically impossible. I doubt any service can magically fix the understaffing issues they have.

It's actually pretty simple - they use technology to navigate the IRS phone system and hold your place in line. When they're about to connect with an agent, they call you and connect you directly to that agent. It's not scheduling a callback from the IRS; it's literally getting you to the front of the phone queue without you having to stay on hold. I was definitely skeptical too - I've spent countless hours on hold with the IRS over the years. But it genuinely works. The service navigates through all the phone tree options and waits on hold so you don't have to. Last tax season I waited over 3 hours on hold and eventually gave up. With Claimyr, I was talking to an agent in under 30 minutes while I was making dinner. The IRS is still understaffed, but this service finds the efficient path through their system.

I don't think she has much unearned income, maybe like $20 in her savings account. But that's good to know for the future. At what point would I need to include her unearned income on MY return instead of hers?

With just $20 in interest, you definitely don't need to worry about it for this year. That's well below any reporting threshold. For your question about when unearned income goes on your return versus hers - you have options when a dependent has significant unearned income. If your dependent has unearned income over $2,300 (for 2024), you can either have them file their own return reporting it OR you can include it on your return using Form 8814. Many parents choose to include it on their return to simplify things, but sometimes it's more tax-advantageous to have them file separately. It depends on both your tax situation and theirs.

I used FreeTaxUSA for my daughter's return last year and it was great! Completely free for federal and only $15 for state. Super straightforward for dependent returns, especially if they just have W-2 income. Highly recommend.