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Can My Parents Make Me a PayPal Account? (Solutions + Tax Info)

Since PayPal no longer offers student accounts, you might be wondering can my parents make me a PayPal account? Here’s a workaround.

How can a teen get paid by PayPal?

teen girl looking at white laptop with father, text overlay, "can parents open their teen a paypal account?"

If your teenager has started looking into earning money online, then you likely both have wondered how to actually get the money to your teenager.

That’s because most online sources of income for teens are going to pay by PayPal, but PayPal got rid of student accounts for under 18 back in 2016.

I’ve got a workaround solution for you, so let’s dive in so you and your teen can get back to working on earning extra cash online.

Psst: stick around, because we're also going to discuss possible tax complications to receiving money on your child's behalf.

Can a Teenager get a PayPal Account?

No, a teenager can no longer get a PayPal account (even if they have their parent’s permission).

PayPal did away with their Student PayPal account and it’s accompanying Debit Mastercard back in 2016. 

And you should know that there can be some serious (or inconvenient) consequences if your teen opens an account for themselves.

Such as:

  • Possibility of being unable to open a PayPal account after turning 18 due to breaking the rules as a teenager
  • Locked account
  • Inability to withdraw the funds until the age of 18

If you search in the PayPal forum, you’ll find lots of stories like these happening.

You don’t want that to be your teen.

So, what are you supposed to do?

Teen PayPal Workaround Solutions

Fortunately, there are a few workarounds to the teen-PayPal issue.

1. Open a Bank Account for Your Teen, and Use that

Some online sources of income for teens accept a bank account that can be linked directly for payment.

In this case, your teen can use their traditional bank account to get paid.

2. Use a Prepaid Debit Card that Acts Like a Bank Account

Does your teenager not have a bank account (or can't use one for their purpose)?

They can actually use a prepaid debit card that acts like a bank account.

The FamZoo Prepaid Debit Card has a separate set of bank routing and account numbers that makes the card electronically accessible as a checking account.

3. Transfer Funds from an Adult PayPal Account to a Prepaid Debit Card

An adult family member can open a PayPal account (or use their existing one) to receive payments on behalf of their teenager, and then move funds from the PayPal account to their teen’s prepaid debit card.

Here’s how that works:

  • Greenlight Prepaid Debit Card: You can use a PayPal debit card to fund money to your child’s Greenlight Prepaid Debit Card through the parent’s wallet. However, Greenlight cards cannot be loaded to PayPal directly as a form of payment.
  • FamZoo Prepaid Debit Card: An adult family member opens a PayPal account, then links their teenager’s card to the PayPal account as a bank account using FamZoo’s routing and account number. The transfer can ONLY happen from the parent signing into their PayPal account, and transferring money – teens cannot drain their parent’s PayPal account of any money from the card, FYI.

Hint: you'll want to keep reading below, where I talk about some of the possible tax implications of this option.

Tax Implications for a Parent Receiving a Child’s Earnings

I want to bring up one thing you may or may not have thought of: tax implications for a parent receiving money on your child’s behalf.

Because let’s face it: to the IRS, this is going to look like income for the parent.

I’ve brought in a tax expert to help with this subject, Logan Allec, a CPA and owner of tax relief company Choice Tax Relief.

Logan says, “it's important for the parent to ensure there's some kind of paper trail to prove that they actually did transfer the money to their child. That way, if the parent is audited, the IRS can't say that the parents didn't just keep that money.”

Logan recommends being very transparent about the money flow on the parent's tax return, and the child reporting the income on their tax return as well.

Here’s the process Logan recommends:

  1. The parent reports the full PayPal Form 1099-K amount as “other income” on their tax return so that a matching error won't be triggered when the IRS's computers attempt to verify that the 1099-K income was in fact reported on the 1099-K recipient's (i.e., the parent's) tax return.
  2. Zero out the income so that the parent doesn't pay tax on it, the parent should put a negative amount on the same “other income” line in the amount of the Form 1099-K. This amount should have the description, “1099-K Nominee [Child's Name].”
  3. The parent should attach a statement to their return to disclose what's going on.
  4. The child would then report the 1099-K amount on their return, probably as self-employment income on Schedule C, and report any expenses they incurred accordingly.

He also adds, “it probably doesn't hurt for the child to attach a statement to their return as well explaining the situation.”

I hope I've made it much easier to understand why a teenager cannot and should not own a PayPal account, the possible tax implications of a parent using their own PayPal account on their child's behalf, and a few alternative solutions to get around this issue. Now you'll be able to decide, along with your teenager, the best path forward so that your child can focus instead on other parts of earning money, like how they'd like to earn it, how they want to manage it, and how they want to spend it.

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Amanda L. Grossman is a writer and Certified Financial Education Instructor, a 2017 Plutus Foundation Grant Recipient, and founder of Money Prodigy. Her money work has been featured on Experian, GoBankingRates, PT Money, CA.gov, Rockstar Finance, the Houston Chronicle, and Colonial Life. Amanda is the founder and CEO of Frugal Confessions, LLC. Read more here.