5 Tax Tips for Teens

1 Your teen’s tax filing requirements depend on his or her status as a dependent as well as the amount and type of their income. Teens who are dependents of another taxpayer generally don’t have to file an income tax return unless the youth makes more than the standard deduction amount for a single filer ($6,300 for the 2015 tax year). A dependent youth can earn up to that much and not have to file a tax return. Follow this link to determine if your teen needs to file a tax return.

2 If your teen is younger than 18 at any time during the tax year and they earn money providing baby-sitting, lawn-mowing or other types of services, they are viewed by the IRS as household employees. In these cases the work that was performed is not subject to Social Security and Medicare taxes.

3 If a teen receives earned (work-related) and unearned (investment) income in the same tax year the investment income amount must be added to the teen’s earned income to determine his or her federal filing requirements. Generally, children age 18 or younger must file and pay taxes on their unearned income when it exceeds a certain amount ($1,050 for the 2015 tax year).

4    Teens working as waiters or waitresses need to know that tips are not free money—they are taxable. If your teen earns $20 or more in cash tips in any one month, they must report their tips for that month to their employer.

5      Even if a teen isn’t required to file their own tax return, it may be beneficial for them to do so. If withholding was taken out of the teen’s paycheck, filing a tax return is the only way they can get that tax money back. Most young workers can file the simple tax return Form 1040-EZ.

A discussion about income taxes can be a great stepping-stone to your teen’s broader financial education. FamilyMint™ encourages parents and children to learn about money together. They also believe that the best teacher is experience, and with FamilyMint™ kids learn by setting and working to achieve goals they create themselves.

SOURCES:

http://www.bankrate.com/finance/taxes/teen-jobs-and-tax-issues-1.aspx#ixzz44DBRIHa8

http://www.dontmesswithtaxes.com/