What Kids With Summer Jobs Need to Know About Taxes
Even teens who won’t make enough money to owe federal taxes need to file a withholding form with their employer.
My son is in high school and will start his first summer job in a few weeks. What does he need to do about taxes?
First, he will need to fill out an IRS Form W-4 to specify how much money will be withheld from his paychecks for income taxes. “Most teenagers working their first summer job won’t earn enough money to end up owing any federal income tax at the end of the year,” says Dan Thomas, a CPA and personal financial specialist in Orange County, Calif.
Generally, anyone with earned income of less than $6,300 in 2015 does not need to file a tax return. If he will earn less than that, your son could check the box on Form W-4 that allows him to claim he is exempt from withholding. Note, however, that a child who is claimed as a dependent by someone else cannot claim an exemption from withholding if he has more than $350 of unearned income (from interest and dividends, for example) and his total income is more than $1,050.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Thomas often recommends that teens claim zero or one withholding allowance instead, in case they end up having enough earned income to owe some tax. “That minimizes the sticker shock of having a significant balance due,” he says. If your son has more money withheld than he owes in taxes, he’ll get a refund when he files Form 1040 next spring. For more information, see IRS Publication 929 Tax Rules for Children and Dependents. Also see How to Fill Out a W-4 Form and IRS Form W-4 for instructions.
No matter how your son fills out the W-4, he’ll still have Social Security and Medicare taxes withheld from his paychecks, and that money won’t be refunded even if he files a return. But it counts toward his Social Security earnings record, which is used to determine his benefits in the future. “If you look at your own Social Security statement, it will include wages all the way back to that first job in high school,” says Kelley Long, a member of the National CPA Financial Literacy Commission. Your son will also have to specify how much to withhold in state taxes.
Kids with summer jobs should also consider contributing to a Roth IRA; you just need earned income from a job to be eligible to contribute to a Roth, regardless of your age. “If parents want to really supercharge the saving and investing aspect of the summer job, they can push their children to establish a Roth IRA,” says Thomas. Your son doesn’t have to use his own money; you can give him the money to contribute. He can contribute up to the amount of money he earned for the year, with a maximum of $5,500.
Starting a Roth when he’s young can give your son a huge head start for the future. He can withdraw the contributions tax-free and penalty-free at any age, and he can withdraw the earnings tax-free after age 59½. “I have done this with my own children for the past few years, and they have become passionate savers and investors,” Thomas says. For more information about Roths for kids, and some administrators that make it easy for minors to open Roths, see Give the Gift of a Roth IRA.
As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.
-
Six Ways Women Can Overcome Any Financial Obstacles Holding Them Back
To improve your financial situation, focus on empowering yourself first.
By Kiplinger Advisor Collective Published
-
Should You Enroll in Medicare if You Still Have a Job?
This question is being asked more than ever these days, so here’s what you can do when it comes to making Medicare decisions while you’re still working.
By Jae W. Oh Published
-
IRS Announces Florida Tax Relief Following Hurricane Idalia
Tax Deadline In response to the severe damage caused by Hurricane Idalia, the IRS has extended tax deadlines for affected Floridians.
By Kiana Curtis Published
-
Warning: Watch Out for New IRS Refund Mail Scam
Tax Scams If you receive a cardboard envelope appearing to be from the IRS about an unclaimed tax refund, be cautious. It’s a new scam.
By Kelley R. Taylor Last updated
-
Your Frequently Asked Tax Questions Answered: Kiplinger Tax Letter
Kiplinger Tax Letter The Kiplinger Tax Letter receives a lot of reader tax questions and its editor, Joy Taylor answers a selection of them.
By Joy Taylor Published
-
Supreme Court: Yes, the IRS Can Secretly Obtain Your Bank Records
The Supreme Court has sided with the IRS in a case that involves owing the IRS money, taxpayer privacy, and notice.
By Kelley R. Taylor Published
-
IRS Processing Improvements Could Bring Faster Tax Refunds
IRS An IRS paperless processing initiative and other service and technology improvements mean taxpayers could see faster tax refunds next year and beyond.
By Katelyn Washington Last updated
-
Supreme Court to Decide if IRS Can Secretly Obtain Bank Records
Among other high-profile issues, the Supreme Court is considering a case involving taxpayer privacy and the IRS.
By Kelley R. Taylor Last updated
-
IRS Says File By July 17 for $1.5 Billion in Unclaimed Tax Refunds
Unclaimed tax refunds from 2019 are waiting for millions of people who might not know it – but only if they file the pandemic-era tax return soon. Are you one of them?
By Kelley R. Taylor Published
-
IRS $80 Billion Plan Targets Taxpayer Compliance, Improved Service
The IRS unveiled its much-anticipated strategic operating plan detailing how the agency will spend $80 billion in funding allocated over 10 years under the Inflation Reduction Act.
By Kelley R. Taylor Published