Tax Tips for Teenagers with Summer Jobs
Like most of us did when we were growing up, a lot of our kids will now be getting to an age when they’ll be starting their first summer jobs. The important thing they need to keep in mind with this extra pocket change is that it’s not all 100% free money. The IRS is, as always, going to want a piece of their earnings — no matter what kind of position they’ve decided to take up. Let’s take a look at some of the more important factors they should keep in mind about how their taxes are going to work.
If you’ve never had a job, you likely wouldn’t realize that employers withhold taxes from employees’ paychecks. Even if teens get into the entrepreneurial spirit and work for themselves, they will still need to pay estimated taxes directly to the IRS on certain dates throughout the year. In our country, this is how our pay-as-you-go tax system works.
A lot of job titles available for teenagers give them the unique opportunity to make tips. While this can be a blessing — extra cash every day, larger income than previously thought possible, big paydays on mundane jobs — they should also realize that they need to report any tips of $20 or more in a given month. Then, when it comes time for their yearly tax return, they need to report all of these tips. Make sure they keep track of how much they’re earning. Typically, their employer will do this for them!
The truth is that your kids may not even be earning enough money to have to worry about filing a tax return. If they’re running a lawn-mowing business in your neighborhood for some of your family friends, then they likely aren’t making enough to need to worry about the IRS chasing them down. Just make sure they remember that if their employer withholds taxes, they need to file a return. This is why it’s so important to meet with a certified tax specialist to make sure all your kids’ tax affairs are in order.