Most summer jobs for teenagers are taxable, but only if the teenager earns more than $12,550 in gross annual income. As a parent, you want to help your teen with managing their income and filing their taxes. ..

When Should teenagers File Tax Returns:

When Working as an Employee in a Company

If a teen gets a job in a company, they might be required to fill out a W-4 form which states how much their tax withholding would be, based on their income.

However, if they earn more than the standard single filer deduction rate, they must file taxes.

If you earn less than $10,000 in the summer, you don’t have to file a tax return. This doesn’t mean you shouldn’t though. ..

The IRS offers a tax refund for people who fill out a W-4 form. If you file taxes on time, you can get a refund.

Working Side Gigs/As an Independent or 1099 Contractor

Many teenagers today are choosing to freelance or side-job during the summer months. This is because it is a time when many people are free from school and can take on various tasks that need to be completed. freelancing or side-jobs can provide young people with the opportunity to make some extra money and have some fun too.

freelancing and side gigs can be different from working as an W-2 employee. For these jobs, the person works as an independent contractor. So, they may need to handle taxes by themselves.

The self-employment tax is a tax that you will be required to pay if you work as an independent contractor. This tax is levied on your income, and it can amount to a significant amount of money. You will need to file taxes if you earn at least $400 in net income, and this number can change depending on the size of your business.

Some organizations issue 1099 forms to independent contractors if their income exceeds $600. The current rate paid for self-employment tax is 15.3% of the net income.

A teenager will be subject to federal income tax if they earn more than the deduction rate.

Taxable Unearned Income

Earned income refers to money one gets from working for oneself. This could include paychecks, dividends, or lottery winnings. Earned income has the same tax rules as unearned income.

The Tax Rules for Unearned Income apply to children less than 18 years old or dependent full-time students less than 24 years old.

A teen will not be taxed for the first $1,150 of unearned income. Subsequently, they will be taxed at their marginal rate for the next $1,150 they get. If their unearned income is more than $2,300, it is subject to the marginal tax rate of the parents.

Teenagers Avoid Paying Taxes

If you are a working teen and don’t have an income from your job, you can avoid paying taxes by claiming the earned income exemption.

You are a young person who is currently studying full-time and has a disability.

If you are a dependent without any disabilities, you can still be taxed if you earn enough to provide for yourself. To qualify, a teen must not provide more than half of their income themselves and they must also live with their parents for more than six months in one year. ..

Taxes on unearned income can still apply to teenagers, even if they are dependents. ..

Teenagers Get Tax Refunds

The main difference between receiving tax refunds as a teen and working adults is that teenagers are not required to pay income taxes. When they exceed the necessary withholding taxes, they are entitled to receive tax refunds.

A teen will need to set up a bank account in their name so that they can get their tax refunds through direct deposit.

Conclusion

Teenagers can be confusing when it comes to taxes because they are their first time dealing with them. By understanding the different types of taxes and how to file them, teenagers will be able to save money on their taxes and have a more accurate understanding of what they are responsible for.

Parents should help their children file their taxes, as there are many tools and professionals available to reduce tax liability. ..