Now that summer is here, many parents are wondering how to keep their children active and productive. For older teenagers, the answer may be to get a summer job. There are many benefits to seasonal work, including earning spending money and getting an introduction into adult responsibility.
Of course, a teenager’s first summer job may also require a lesson on taxes – both for the teen and for his or her parents.
The online resource Accounting Today recently offered some tax tips for parents whose children will be working a summer job. While some of the tips are not likely to apply to most people, there are two tips worth repeating:
Reminder: You can still claim your child as a dependent.
Your teen may be earning money, but chances are good that you are still paying for at least half of their day-to-day support. If that’s the case, and if your child is under the age of 19 (or 24 if a full-time student), you can still claim him or her as a dependent on your own taxes.
Reminder: Pay Attention To What Kind Of Employee Your Teen Is
Some teenagers are hired as regular employees, while others are hired as independent contractors. Depending on which type of employee your child is (and how much money he or she makes), taxes may not be withheld automatically. This means that some money may need to be set aside and paid at tax time next year.
In many cases, students who work summer jobs do not need to file a tax return the following spring. And if they do, they typically get to keep nearly all of what they earn. However, you shouldn’t take anything for granted. If you take some time now to investigate their potential tax liabilities, it could save a lot of time and headache later on.