Taxes for Teens (Life Skills)

Look for more in-depth discussion of this topic and more in Through the Door: Homeschool to College Success! This book & worktext set will help you and your high school student breeze through the steps of college and scholarship applications, as well as brushing up on study habits and life skills. The worktext includes activities, worksheets, and planning pages, and accompanies the book.

What's the Deal with Taxes?

You can see sales tax when you go to purchase something, and the price of something you buy at a store upon checkout is higher than the shelf price.  Similar to sales tax, the government charges income tax.  The income you earn goes to pay for your home, food, expenses, and clothes.  The government takes a portion of the money you earn to help pay for others' home, food, clothes, and expenses...as well as public education, public healthcare, emergency funding, and the military.

In the US, taxes must be filed and paid by April 15th.  The IRS (Internal Revenue Service) enforces tax law, and you don't want to mess with them, so your best option is to accurately figure out what you owe and pay it.

Interestingly enough, taxes didn't exist in America until 1913, when Woodrow Wilson passed the 16th amendment saying, "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."

What Should I Know?

Any job is going to be subject to both state and federal taxes.  Each state has its own set of rules, so you'll want to check with a tax expert to see what applies in your state.  To muddy the waters further, tax laws change annually, so what was right this year may not be right next year.

If a teen is under the age of 19, and earns less than the standard deduction amount, an income tax return probably won't need to be filed.  This can vary though, depending on whether there is passive income (such as investments).

When your teen is first hired, pay attention to how they are classified.  Regular W-2 employees will have the tax withheld, which could result in a refund later.  Contract employees don't have any taxes withheld, which means you have to figure out what you owe and pay self-employment taxes to the government later.

Investments seem like such a good idea...and they are!  But when it comes tax time, they can become a headache.  If investment income surpasses a threshold (it changes annually, so look up the current one), it is generally taxed at 10%.  One idea could be to put investments into a Roth IRA, so that it will grow tax-free.  Be sure to check all of the Roth IRA rules before moving your money.

   

Get Some Practice...

Upon being hired for a job, there is usually a slew of paperwork to complete.  As an adult, we can feel overwhelmed by this...can you remember how it feels to complete it as a teen?  These forms can be intimidating!

• Print out a practice W-4 form and go over it with your teen.
• Make sure he knows his social security number.
• Go over each section and talk about what it means.  
• Explain that it is fine to ask an employer questions.
• Caution him against completing forms via guesswork!
• More help for filling out W-4 forms can be found here.
• Here is an app from the IRS which will allow you to complete simulations for a better understanding of how to do your taxes.
• Here are several lessons, broken down individually, from the IRS for use in a classroom.

Pick up your copy of Through the Door: Homeschool to College Success!