Will your Teen's Summer Job Affect Your Taxes?

Author: Jenny Shilling

Summer is almost over, and with its end comes the end of summer jobs.  Having received paychecks for the first time was probably very exciting for your teen, until he or she learned just how much they would have to pay in taxes.  How much did your teen earn? Does the summer employment affect whether or not you can claim your teen as a dependent? Are there any child related tax credits you might lose because of their employment?

Many things change when your children start working. Let's look at the tax impact since those are clearer and certainly more readily explainable than other changes with our teenagers.

1. Filing Requirments. There is a minimum filing requirement. Dependent children have to file a tax return if they earned income of more than $6,200.  There are also other filing requirements based on gross income, which include items such as dividends and interest.
2. 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.
3. 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.
4. 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.
5. Child Tax Credit? Each dependent child under the age of 17 can qualify you for the $1,000 per child tax credit. The credit is available to you even if your child is working and paying taxes on their 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.

For questions regarding your tax return, or your child filing for the first time, please contact a qualified tax professional.  The specialists at The Tax Office, Inc., are availble to field your questions.  Contact us for a no cost, no obligation discussion of your tax situation.