The Money Talk: Taxes, Banking, and What a Kid Can Legally Do

Four hundred dollars.

If a kid clears $400 or more in net self-employment income in a year, a federal tax return is required and self-employment tax is owed. That threshold applies regardless of age and regardless of how small the total income is, and it has held steady for both 2025 and 2026.

Two things about that number are commonly misread.

It is net, not gross. Four hundred dollars is what is left after the expenses of running the business. A kid who took in $600 and spent $250 on supplies and fuel is under it. This is the practical reason the receipts matter.

And it is separate from income tax. Self-employment tax covers Social Security and Medicare, currently 15.3%, and it is owed at $400 even though a kid earning under the standard deduction, which is $16,100 for 2026, will usually owe no federal income tax at all. Most families assume the big number is the only one. The small number is the one that actually applies to a lawn business.

Mowing, babysitting, dog walking, and selling things all count. The work being informal does not change the category.

The reason a parent ends up involved in the paperwork is not capability. It is contract capacity.

Under U.S. law anyone under 18 is presumed to lack full ability to enter binding contracts, and contracts a minor does sign are generally voidable by the minor. The practical result is a short list: they usually cannot open a bank account on their own, sign a lease, file business formation documents, or agree to the terms of most platforms.

That list is worth knowing precisely, because it is exactly the set of places where stepping in is the right kind of help. The test from the coach not operator guide holds here: is this closed to them because of their age, or because it is hard? Age is a wall you open. Hard is the point.

Cash is perfectly fine. The record is the problem. A kid who takes twenty dollar bills all summer and writes nothing down cannot answer the only question that matters, which is what they actually made.

If you want an app, the age floors are real and they differ.

Venmo offers Teen Accounts for ages 13 to 17, set up by a parent and connected to the parent's own account. Cash App has offered sponsored accounts for 13 to 17 year olds since 2021. Apple Cash covers under 18 through Family Sharing. Zelle and PayPal both require users to be 18 or older and have no minor option at all.

Under 13, the realistic answer is cash or a parent's account with a written log, and the log is not optional if you want the kid to learn anything.

One thing to watch. These apps distinguish personal payments from goods and services, and payments flagged as business can generate tax forms. The reporting thresholds have changed repeatedly in recent years, so check the current one rather than relying on what was true two years ago.

A minor generally cannot open a business bank account by themselves, and most families discover this at the counter.

The workable options are a joint or custodial account with a parent, a teen checking account at a bank that offers one, or a parent opening the account with the kid as an authorized user. Which one you pick matters less than two things: that the money is separate from household money, and that your kid can see the balance without asking you.

A labeled envelope and a notebook beats a sophisticated account nobody ever opens.

Almost certainly not, and this is where families spend money they did not need to spend.

A business with no paperwork is already a sole proprietorship. That is the default, it costs nothing, and it requires no filing to exist. For a kid mowing lawns, that is the correct structure.

An EIN is free from the IRS and mostly unnecessary for a sole proprietor with no employees, who can use a Social Security number instead. It becomes useful mainly when a bank asks for one.

An LLC costs money to form, costs money most years to maintain, and adds filings. The liability protection it offers is the reason it exists, and for a kid doing small jobs in a neighborhood that protection is usually addressing a risk that insurance or common sense handles better. It becomes a real question when revenue is real, when somebody gets hired, or when a customer requires it.

Whether a license or permit is needed is a separate question with a local answer, covered on the business license page.

Earned income makes a kid eligible for a Roth IRA, and self-employment income from mowing lawns or babysitting counts.

It works as a custodial account. The parent is custodian, the money belongs to the kid outright, and control transfers at the state's age of termination, usually 18 or 21 and as late as 25 in some states.

The contribution limit is the lesser of the kid's earned income for the year or $7,500 for 2026, up from $7,000 in 2025. A kid who earned $2,000 can put in $2,000, not $7,500. Anyone can supply the money, so a parent can match what a kid contributes, as long as the total does not exceed what the kid actually earned.

Keep proof. The IRS expects documentation that the income was real, which means invoices, a log, or a Schedule C rather than a recollection.

There is a nice irony worth pointing out to a teenager. The $400 filing requirement that feels like a pointless burden is what creates the paper trail that makes this possible. A kid who files, even on a small amount, has documented earned income, and documented earned income at fourteen has decades to compound.

Four situations are worth an hour of a professional's time rather than an evening of searching.

Revenue that has stopped being small. Hiring anyone, which pulls in a whole separate body of employment rules. Food, which is where families most often meet real requirements. And anything involving a contract, a customer's property, or a genuine safety risk.

An hour with an accountant early costs less than untangling a mess later, and most will answer a simple question about a kid's lawn business quickly and cheaply.

1. Work out whether your kid cleared $400 in net profit this year. That single number decides whether a federal return is required.
2. Start a record now, even a notebook. What came in, what went out, and the date. Expenses reduce the net, and the net is what counts.
3. Check the age floor on whatever payment app you are considering, and set up the teen version properly rather than running it through your own account indefinitely.
4. Open somewhere for the money to sit that is separate from household money and that your kid can see.
5. Skip the LLC unless somebody with a license tells you otherwise. Sole proprietorship is the default and it costs nothing.
6. If your kid has earned income, look into a custodial Roth IRA. It is the most valuable thing on this page.
7. Keep proof of what was earned. Invoices, a log, a Schedule C. It matters for the Roth and it matters if anyone ever asks.
8. Once revenue is real, your kid hires anybody, or food is involved, pay an accountant for one hour.