If your teenager has been working a summer job for the first time, they probably have some confusion about withholdings, tax returns, and paperwork. And you may have some questions, too, about things like your child’s dependent status and their minimum income filing requirement. If your child has a summer job, make sure you stay tax compliant by following these steps.
1. Talk them through the W-4
Your teen may be alarmed or a little grumpy when they see their first paycheck. “Withholdings? What are those?!” When you fill out a Form W-4, talk your child through it, so they know what to expect come tax season. Explain that their federal and state taxes are different, and the purpose those withholdings serve. Also, make sure your child claims zero exemptions–you don’t want them to owe money to the IRS.
2. File a tax return, if…
If your child makes more than $6,200 in a given year, they’ll need to file a tax return. There’s no minimum age requirement–it’s entirely income-based. Take note of whether your child is receiving other income, like dividends and interest, as those require different filings. And remember, you won’t be filing your child’s income on your own return! Your teen will have a tax rate all their own, and probably won’t be taxed at the same rate as their parents.
3. And some helpful reminders:
If your child is working at a restaurant, ice cream stand, or any other job where they may receive tips, make sure they know tipped income is taxable. Their employer probably has policies in place for reporting tipped income, so make sure your child knows to talk about this with their boss. As a parent, your child remains a dependent if they don’t provide more than half of their own financial support. And if your child is an entrepreneur who’s self-employed for the summer, make sure they familiarize themselves with the IRS’s rules on self-employment and taxation. They may have to make payments to the IRS throughout the year by designated deadlines.
And when your first-time employee is ready to file a tax return, come into Hacker Accounting. Give us a call at 602-375-5251 to get started.