picture of tax withholdings form

Tax Tips for Students With a Part-Time Job

by Aug 10, 2021Accounting for Business, Tax Accounting

High school students often work a year-round part-time job or a seasonal summer job to earn some money while balancing the responsibilities of school, and every student with part-time work should keep in mind some important tax considerations.

Does My Teenager Need To File A Tax Return?

The IRS outlines how much an unmarried dependent can earn before being required to file income taxes.  Here are the standard deductions for 2021:

“You must file a return if any of the following apply:

  1. Your unearned income was more than $1,100.
  2. Your earned income was more than $12,400.
  3. Your gross income was more than the larger of—
            • $1,100, or
            • Your earned income (up to $12,050) plus $350.”

Can I Continue To Claim My Dependent On My Taxes?

If you have a teenager with a part-time job, you usually can continue to claim him or her on your income taxes.

If the dependent is under 19 years old or under 24 years old and a full-time student, they can still be claimed as a dependent as long as you provide at least half of their support.

Should I Add My Teenagers Income To My Income Taxes?

No, you should not.

A dependent’s income should not be included on a parent or guardian’s income taxes.  Their income should only be reported on their own income tax filing.

Filling Out A W-4 Form For A Teenager

The W-4 form is used by an employer to determine the taxes taken out of a paycheck. For this example, this is how an unmarried dependent teenager would fill out a W-4 form if they earned up to the standard deduction amount.

In general, a teenager or a student who is claimed as a dependent on a parent or guardian’s taxes can earn up to the standard deduction amount in a tax year without having to pay income taxes.

If the teenager has investments in his/her name with interest income, the instructions below will not apply.

The basic personal information in Step 1 shown below should be completed:

Step 2 below is for multiple jobs – If the teenager has only one job, skip this step.

Step 3 below is for claiming dependents – For unmarried, dependent teenagers, skip this step.

Step 4 below is optional – For unmarried, dependent teenagers, skip this step.

Below 4(c) Write “Exempt” as shown above.  “Exempt” indicates that the teenager Is not obligated to pay taxes; therefore, they do not need to have taxes withheld from their paycheck.

This does not exempt the student from paying Social Security and Medicare.  Those will still be withheld from the teenager’s paycheck.

Final step is to sign it and give back to your employer.

Working For A Family Business

If the teenager is working for a family business, there may be other tax requirements; the teenager may owe taxes, and you should give us a call to ask about your teenager’s work situation.

How To Claim Tips As Income

For those teenagers with a job that earns tips, those tips are taxable income.  If your teenager earns $20 or more in tips in a given month, those tips need to be reported in writing to the employer by the tenth day of the month following receiving those tips. The employer will withhold Social Security and Medicare and income taxes and include the tips and wages on your teenager’s W-2.

Teenager Jobs That Pay Cash

Teenagers who work jobs that pay in cash such as babysitting, lawn mowing, dog walking, or pet sitting will still need to report those cash earnings and may be liable for self-employment taxes.

With an employer, the employer withholds Social Security and Medicare taxes from your paycheck. The employer matches that withheld amount and submits the combined amount to the IRS.

If a teenager is working for cash and earns more than $400, the teenager is self-employed and is required to pay the total amount for the Social Security and Medicare taxes.  (This is the self-employment tax). Even if the teenager is exempt from income taxes, they still need to pay Social Security and Medicare.

Tax Returns for a Teenager With Part-Time Employment

For help filing your tax returns, give us a call.

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