Summertime Jobs, Teens, & Taxes

Summer is almost here, and with its end comes the end of school for most teens.  Faced with three months of endless days, a lot of teens have started looking for a summer job. Here are a few tips and planning ideas to help save you time, money and taxes next filing season when your child’s W-2 comes in the mail:

Filing Requirements.
For 2019, the standard deduction for a dependent child is total earned income plus $350, up to a maximum of $12,200. Thus, a child can earn up to $12,200 without paying income tax.

Do I claim their income?
Your teen is required to file his or her own taxes if the child is working or receiving income other than interest and dividends.

Teens Owing Taxes?
A good rule of thumb for your working child is to claim zero exemptions on their W-4 to ensure they have enough taxes withheld so they don’t owe money to the IRS come tax time.

Still a Dependent?
Your dependent child can have any amount of income and still be claimed as a dependent as long as they do not provide more than half their own support: gifts, entertainment, food, shelter, clothing, purchasing a vehicle, maintaining a vehicle, other forms of transportation and school expenses.  If your child can be claimed as a dependent on your tax return, they cannot claim their own exemption.

Child Tax Credit?
Each dependent child under the age of 17 can qualify you for the $2,000 per child tax credit. The credit is available to you even if your child is working and paying taxes on their income, however it is dependent upon your income.

Having a working child can impact your tax return. It is important to know what impacts your child’s income has on your tax situation. Be sure to consider the tax impact of your child working a summer job – every summer. It could cause an underpayment of taxes by either you or your child or a lost refund if the return isn’t filed. If you have any questions just give us a call.