We are in the heat of summer once again and perhaps your kids are too old, or think they’re too old, to go to day camp. Maybe it’s time they acquired a steady income. Teenagers working summer jobs is a time-honored tradition, a first step in the passage to young adulthood.
Teenage employment typically ranges from the tried-and-true lawn mowing, baby-sitting and lifeguarding to in-office work as clerks and assistants to helping out mom and dad in the family business.
Now part of this transition coincides with teens becoming familiar with the rules and regulations enforced by the IRS. Yep, things can quickly go from being a source of pride — I’m now paying at least part of my way! — To irritation — Hey, why is this FICA guy getting so much of my money?!
The good news is that in some cases, taxes aren’t a worry for teen workers. While the Internal Revenue Service generally wants its piece of a worker’s earnings, some special tax rules apply to young employees, based not only on age, but also on amount of money earned and even the type of job.
Here are some highlights of tax issues for teens (and their folks) to keep in mind:
- If a teen worker can be claimed as a dependent by another taxpayer, usually the kid’s parents, the young worker does not have to file unless his or her wage income is more than the standard deduction amount for a single taxpayer. For the 2012 tax year, that’s $5,950.
- If a youngster decides that the entrepreneurial route is the way to go, the IRS takes an interest in the work at a much lower level. Net earnings of $400 or more generally necessitate the filing of Schedule SE to pay self-employment taxes. But the traditional young worker jobs of babysitting, lawn mowing and newspaper delivery are exempt from the self-employment filing requirement as long as the worker was younger than 18 at any time during the tax year in which the job was done.
- A young person could find that filing a tax return is a good idea, even if he or she isn’t required to do so. This is the case, for example, where withholding was taken out of the kid’s paycheck. Filing is the only way to get the money back. The good news is that the simplest return, Form 1040-EZ, is, as its name indicates, easy to complete.
The IRS has a special Web page for young people with summer jobs.
As for finding work for kids, well that’s getting tougher. Fewer than a third of American teenagers now hold summer jobs such as running cash registers, mowing lawns or busing restaurant tables, according to an analysis of Census Bureau Current Population Survey data from June to August 2011 by Northeastern’s Center for Labor Market Studies.
The decline has been particularly sharp since 2000. That year, more than 50 percent of teens had summer jobs, but employment now for 16- to 19-year-olds has fallen to the lowest level since World War II.
JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.