Income Taxes as a Teen
You probably already have a job, or hope to get one. Maybe because you want to help out your family in a tight financial situation, or just would like some extra cash. Whatever your reason, there are a few things to keep in mind.
Taxes are a paying percentage of the money you earned to the government, typically on unearned and earned income. You likely know that your parents file a tax return every April 15 (the standard tax filing deadline), except for the 2020 tax year. As a minor under 19, your parents can claim you as a dependent but are also required to report your income (unearned and earned) to the IRS.
Unearned income normally includes gifts from other of-age adults. These gifts can include stock gifts, which could produce income from dividends and matured bonds to the gift receiver. However, this does not have much to do with having an actual paying job. To learn more, please visit Investopedia.
How You Pay Taxes as a Working Teen:
When you first get a new job, even if it’s only part-time, your employer will ask you to fill out a W-4 form. This form allows your employer to determine the correct amount of tax they should withhold from your paycheck. This means that your employer will take some money out of your paycheck and pay it to the IRS as income tax.
You will generally need to file a tax return if your earned income (or paycheck) for the year exceeds the standard deduction for this specific tax year. The standard deduction for 2020 is $12,400 (may vary by year). Most people suggest filing a tax return in case you are eligible for a refund. You may be eligible for a tax refund if more tax was withheld from your paycheck than the amount of tax you owe. More simply put, you can get your money back if you pay too much tax.
Normally, at the beginning of the year, your employer is required to give you a W-2 form, documenting your wages or salary for the previous tax year. The time you receive the form can vary but is generally before the end of January.
The W-2 form is extremely important and required if you are filing a tax return. You may also need to provide other forms (like 1099-INT for interest income), but they are separate from taxes you incur by working. Have fun figuring out your taxes and maximizing benefits!
Written by Allie Chang