Working children may not have to file a tax return, but they should do it to reclaim money withheld from their paychecks. Plus, can you use a 529 plan to repay student loans? By Janet Bodnar, Editor-at-Large April 2, 2008 As April 15 approaches, taxes are on the minds of students and parents -- and one thoughtful grandparent:It pays to file In your column [Kid IRA Q&A], you note that children don't have to file a tax return as long their earnings are less than the standard deduction. That's true. But they do have to file if they would like to have the federal withholding sent back to them. The same applies to their state tax return. And in our county children under 18 don't have to pay city taxes, so they would also have to file a city return to get their withholding returned to them. Sometimes that can add up to good pocket change. Sign me a grandma who tries to look after her grandchildren. Your grandchildren are lucky to have you. You're correct that kids should file a tax return in order to get back money that was withheld from their paychecks. One caveat: Social Security taxes aren't refundable. Advertisement No parental IRA deduction I have a college-age daughter who earned $10,000 in 2007 working part time. Can I contribute to her IRA and take a deduction on my return? Somewhere I read that you can take 50% of the contribution as a parental deduction. Sorry, but you aren't entitled to a deduction. Your daughter's earned income qualifies her to contribute to an IRA for 2007, and she has until April 15 to do it. For 2007 the contribution limit is $4,000 ($5,000 for 2008) or the amount of her earnings, whichever is less. You can give her the money to contribute to the account. But no matter where the cash comes from, your daughter gets the deduction, not you. Because her income is so low, a deduction doesn't have much of an impact. So your daughter should probably contribute to a Roth IRA. There's no up-front tax break with a Roth, but withdrawals would be tax-free in retirement, when your daughter would be in a higher tax bracket. See Why You Need a Roth IRA to learn more. 529s for student loans? I have a tax question about 529 college-savings plans. I'm already in college but probably have about four years left including law school. Can I open a 529 plan for myself, invest in something low-risk like a money-market fund, and then use the money to help pay down school loans when I graduate? Advertisement Unfortunately, you can't. You can use money from a 529 plan tax-free for qualified educational expenses, which include tuition, fees, books, supplies, equipment and room and board, within certain limits. But student loan repayments aren't on the list. Joseph Hurley, of Savingforcollege.com, says the IRS will count a student loan only for the year in which the loan is taken out to pay eligible expenses, not for the year the loan is repaid.