Tax Tips for Teens

Tax season is a stressful time for adults and accountants, characterized by late nights and gulping down unhealthy amounts of coffee while praying the batteries in the calculator can make it just a bit longer. For many employed high schoolers, the April 17 filing deadline set by the Internal Revenue Service will be their first time submitting taxes. It’s a deadline that can often sneak up on teenagers who are lost in the intricacies of figuring out if they ought to be submitting a W-2 or a W-9, and if they need to report that baby sitting job.

Jeff Katz is a Certified Public Accountant (CPA) with Freirich & Katz, LC who helps families and individuals through the process of filing taxes. He offered some helpful advice to teenagers on how to know if they need to file taxes, what forms they need to complete and some precautionary notes.

Question: Do I need to file taxes for 2011?

Answer: The answer is maybe. If you are a dependent (living with your parents and they pay for more than 50% of your living expenses), then you must file a return if any of the following apply:

1) You earned more than $5,800 in wages
2) You earned over $950 in interest income or dividend income (called unearned income, i.e. owning stocks or interest from a bank account)
3) Your gross income exceeded your unearned income over $950, or you earned income of $5,800

Question: What if I have unearned income over $950, but nothing else, do I still need to file?

Answer: If you have interested and dividend income only of more than $950, your parents may elect to report your income on their tax return instead of a separate filing. However if you owned and sold stocks you will generally need to file your own return.

Question: I have a job, what does that mean for me when filing taxes?

Answer: If you work for an employer, all payments you receive for services are taxable by both the federal and state government. Your employer will give you a W-2 form or wage statement which you want to hold on to for preparing your return.

Question: I work at a restaurant, do I need to report tips on my tax return?

Answer: All tips are considered income and thus subject to income tax. If you earn over $20 in tips in a calendar month you should report this to your employer using Form 4070. (from irs.gov)

Question: I mow lawns and occasionally babysit, do I need to file taxes?

Answer: If you are self-employed, such as mowing lawns or babysitting, you need to account for all your income received and report it on your tax return. If your net earnings (income minus business expenses) are over $400 you must pay self-employment tax and will need Form 1040. (from irs.gov)

Question: Do I deduct myself as a dependent on my tax form?

Answer: It is very important that if you file your own tax return and you live with your parents who provide your support (over 50% of expenses) that you do not deduct yourself as a dependent, but rather check the box: dependent of another.

The last bit of advice Katz had was to communicate and work with your parents as you file your returns. It’s highly recommended that your parents or tax preparer review and approve before you submit your paperwork. Even though they make look very simple, they are much more complicated when you get into it, Katz said.

If you have any further questions, you can consult the IRS website where they have a section dedicated to high school students.