Teens are literal people. When you offer them a job for a certain amount of money, this is what they expect to receive. In the world of work, this is not the case. Teaching your teen about taxes can make the transition less of a shock.
Regardless of the amount of money you earn, everyone is charged income tax. By means of these taxes, the government is able to produce funds that provide beneficial services to citizens and finance military efforts.
It is important for your teen to understand that an hourly wage is not an exact way to calculate their weekly income. Explaining how income taxes function will help them comprehend why their hourly wage can only provide an idea of how much they have earned during a day of work and that the number of hours they work multiplied by their hourly wage will not be the same number they will see on their paycheck.
When a teen gets a job, they will have to complete a tax form that they probably will not understand. Tax forms must be filled out properly because the government will use that information when determining how much and which taxes to take out of their paycheck. For these reasons, parents need to help their teens understand the details of tax forms and assist them as they fill them out.
For teens with a job, the earning potential is not enough to file a tax form on April 15th of the following year. There is an amount that, if a person’s earnings fall below it, they are not subject to income tax filing. Your teen will almost surely fall in that exempted category.
Show your teen how to get the most money that they can on their check. Even teens are allowed to claim deductions. They can claim one deduction even if they are included on their parents’ tax return. That deduction will net them more money in their pocket. Since they won’t make enough to file, this is a wise decision for them to make.
As teens grow older and begin to earn more and more money, the way they handle their taxes will change. Help them to understand that they should do all they can to benefit from the brief time period when they will not be taxed, since this will not be the case once they begin to make more money and have to file for and pay additional taxes.
Many teenagers earn money self-employed by selling things on eBay, babysitting, and doing other jobs. These earnings could potentially put your teen at an income level that requires them to file taxes. You can find out what the limit is for being eligible to not file taxes. It would also be wise to explain some of the various tax forms to your child and motivate them to save money, since it is possible that they will owe the IRS taxes.
Teaching teens about taxes from the very beginning of their working life will help them be prepared to handle this reality. Discuss with them the need to keep good track of the money they earn so that at the end of the year they will be able to determine whether or not the government requires that they file for taxes.