Summer jobs, and taxes, for teens
Wednesday, July 06, 2011
Ah, summertime. No worries. No hassles. No cares.
Unless you're a teenager with a between-semesters job.
A lot of young people look for work when school is out. They like having their own money and the bit of independence that it allows.
But beware young workers. You likely will have some tax issues to take care of, too.
Yep, Uncle Sam doesn't discriminate when it comes to getting a share of earnings. Regardless of your age, the IRS typically is looking to collect. And that's today's Weekly Tax Tips topic.
Just how much or whether the tax man is due anything depends on not only the amount of money you earn, but also the type (earned via a job, including self-employment, or unearned investment income) and whether you're a dependent.
Specific tax considerations for teenage workers are detailed in my story Teen jobs and tax issues, but here are the highlights:
Wage income threshold -- Young people who can be claimed as a dependent by another taxpayer, usually a kid's parents, must file if their wage income is more than the standard deduction amount for a single taxpayer. For the 2010 tax year, that's $5,800.
Self-employment earnings -- If your child is an entrepreneur, the IRS comes calling at a much lower earnings level. The youth must file a tax return and Schedule SE if he or she nets at least $400 in self-employment income.
The typical kid jobs of babysitting, lawn mowing and newspaper delivery (yes, it still exists!), however, are exempt from the self-employment filing requirement as long as the worker was younger than 18 at any time during the tax year that the kid held the job.
Filing when it's not required -- Sometimes a young earner should file a return even if he or she isn't legally required to do so. That might be the case where withholding was taken out of the kid's paycheck. To get the money back, the young person will have to file. At least the easy Form 1040-EZ will work here.
To avoid that, however, a young employee who doesn't expect to make enough this summer to exceed the filing requirement amount trigger should note line 7 on his or her summer job's W-4. When the kid writes "exempt" on that line, the employer won't withhold any taxes from the young worker.
Other young tax considerations: There also are tax issues that involve working for the family business and any investment income a youngster earns.
Again, details on those situations are in my story, but for most youngsters' summer jobs, the three notes above should take care of things.
Don't be in such a hurry: Finally, let me offer one piece of unsolicited advice to the kids.
I appreciate your energy and desire to earn your way, but if you can get away with not working, don't. You'll have lots of future summers in which to be a wage slave.
- Teens, summer jobs and taxes
- 3 requirements to deduct job search costs
- Jobs, no jobs and taxes
- Writing off job-related moving costs
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