According to the IRS, any individual under the age of 65 who earns $9,750 in a given year has to file a 1040, U.S. Individual Income Tax Return.
Most people’s knowledge regarding taxes comes down to two things: Everyone has to pay them, and nobody likes to. However, as Benjamin Franklin famously said, taxes are one of life’s two certainties, making it an important topic for young people to get a grasp on.
While there’s no need for parents to turn their teen into a budding CPA (unless accounting is their passion!), there are some general things teens should be aware of when it comes to taxes.
1040: Paid Jobs=Taxes
A first job is a rite of passage for most teenagers, and while the prospect of making their own money for the first time in their lives is exciting, they need to remember that some of that money has Uncle Sam’s name on it.
According to the IRS, any individual under the age of 65 who earns $9,750 in a given year has to file a 1040, U.S. Individual Income Tax Return. Additionally, even if a teen is not working but has reached this amount threshold based on interest, as in from a savings account, filing an income tax form is also required.
However, teens under the age of 19 or are full-time students who only earned income from interest and dividends can have their income included on their parents’ tax returns, doing away with the need for them to file a 1040. To do this, parents would have to use an 8814, Parents’ Election To Report Child’s Interest and Dividends.
Of course, even if teens don’t make enough money to require them to file a 1040, doing so anyway can be beneficial. Any time the government collects taxes from an employee’s paycheck, there’s a chance that employee can receive a portion of that money back in a refund. If a teen doesn’t file a return, however, they won’t be able to receive this refund.
The point is, once a teen begins coming home with pay stubs, they have become part of the U.S. tax system, with all the responsibilities and requirements that entails. More importantly, a first job presents the perfect opportunity for parents to explain how taxes work to their kids. Employees should know where their money is going and why, and when it concerns money that belongs to them, teens will be far more likely to pay attention. Besides, complaining about taxes is just as much a rite of passage as getting a job.
Check out the 1040 form HERE.
For more info on teens and taxes, visit the IRS HERE.