Summer Jobs Teach Teens About Taxes
So your kid has landed a summer job. Great news!
A first summer job that requires a kid to fill out a W4 form is exciting and also eye-opening since this is typically when kids learn about taxes. Depending on how much your child earns during the summer will depend on whether or not they will have to pay federal taxes. If he or she is still claimed as dependents by their parents or guardians, they may or may not have to pay federal taxes.
Help Your Kid Understand Their Tax Responsibility
Summer jobs and internships provide the first shock about how much Uncle Sam takes. It does take some getting used to. Taxes are not something most kids think about unless they are born into a home of tax attorneys or CPA’s. But, before long, the responsibility of paying taxes becomes second nature. Whether anyone likes it or not, and most people don’t like it one bit, we all have to bite the bullet and pay the taxman.
You can help your kids understand the differences between employed and self-employed workers. If your kid is waiting tables, you can explain that cash tips are also reportable as income. And if a child is working for his or her parents, they may not need to pay taxes if they are under 18. In fact, that could represent a nice tax break for the parents.
By the time a child gets a college internship, they probably know about taxes. However, once again the amount they earn is the crucial factor. If they only earn money during the summer, they may not earn enough to require reporting their income. If they are making good money and they continue to work after the summer break, you’ll want to make sure they have enough withheld so they don’t end up owing money.
Summer jobs can be great fun and great learning opportunities for kids of all ages to learn about their responsibilities as taxpayers. It’s fun to watch the excitement as kids anticipate their first paychecks. They immediately learn that taxes are not fun, but hopefully they’ll understand they are a necessary part of society.