Helping Your Child Complete Their First Tax Return

What’s inside this article?

• When does your child need to file a tax return?
• What documents will they need to gather?
• Common first-time mistakes to watch out for
• Creating an opportunity to build financial literacy
• When professional help may make sense

There are a lot of “firsts” that mark the transition into adulthood — a first job, a first apartment, a first real paycheck. Filing a first tax return often lands somewhere in the middle of that list: not especially exciting, but quietly important.

For many young adults, taxes feel intimidating. The forms are unfamiliar, the language is confusing, and the fear of making a mistake can lead to avoidance. For parents, this moment presents an opportunity — not just to help get a return filed correctly, but to start building confidence, financial awareness, and healthy habits that will last well beyond this tax season.

Below are practical ways to guide your child through their first tax return, while giving them the tools to understand and take on the process in the future.

Confirm Whether They Need to File

One of the most common questions young adults ask is: “Do I even need to file?”

In general, your child likely needs to file a tax return if they:

• Earned income above the annual filing threshold ($15,750 for 2025 taxes)
• Had freelance, contract, or gig income (even if it feels small)
• Had federal or state taxes withheld and may be owed a refund
• Earned interest or investment income

Even if filing isn’t strictly required, it can still make sense to file:

• To recover taxes that were withheld
• To establish a tax filing history
• To practice while their situation is still relatively simple

Gather Documents Early

For first-time filers, the challenge usually isn’t the tax software — it’s knowing what documents to look for.

Encourage your child to gather:

• W-2s from employers
• 1099-NEC or 1099-MISC for contract or gig work
• 1098-T if they’re in college and paid tuition
• 1099-INT or 1099-DIV for bank or investment income
• Any notices showing taxes already paid

This is also a great opportunity to reinforce good habits:

• Open and read mail from financial institutions
• Save tax documents in one folder (digital or paper)
• Don’t ignore things that look “official”

Clarify Dependency Status Early

Dependency rules are one of the most common sources of confusion and mistakes.

In many cases, parents can still claim a child as a dependent if:

• The child is under age 19 (or under 24 and a full-time student)
• You provided more than half of their financial support
• They lived with you for more than half the year (with exceptions)

Why this matters:

• It determines who can claim education credits
• It affects the child’s filing status
• It prevents duplicate claims that can trigger IRS notices

Review the Return Together

If they’re using tax software or working with a professional, consider:

• Sitting down to review the return together
• Walking through where the numbers came from
• Explaining why they’re getting a refund — or why they owe taxes

Watch for Common First-Time Mistakes

Some issues show up repeatedly with first-time filers:

• Forgetting side or gig income
• Underestimating self-employment taxes
• Thinking a refund is “extra money” rather than over-withholding
• Filing without coordinating education credits
• Missing deadlines or ignoring IRS notices

Use the Moment to Talk About the Bigger Picture

Once the return is filed, that’s often the best time for a broader conversation.

You might touch on:

• How paycheck withholding works
• Why freelancers need to set money aside for taxes
• The value of starting retirement savings early (even small amounts)
• How income, spending, saving, and taxes all fit together

When Professional Help Makes Sense

As income and complexity grow, it may be worth involving a CPA or your Coldstream advisor in conversations around tax returns.

This can be especially helpful if your child:

• Has meaningful freelance or self-employment income
• Receives stock compensation or investment income
• Attends college and qualifies for education credits
• Lives or works in more than one state

A Final Thought

By helping your child with their first return, you can teach them valuable financial literacy skills while ensuring they meet their tax obligations and receive any entitled refunds. And as always, if you’d like help thinking through tax planning for your family — including how a child’s income fits into the broader picture — we’re here for you.

* Certified Financial Planner Board of Standards Inc. owns the certification marks CFP^®. CERTIFIED FINANCIAL PLANNER™ and CFP^® in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements. CDFA^® and Certified Divorce Financial Analyst^® are trademarks of The Institute for Divorce Financial Analysts™