How Will Your Teen’s Job Affect Your Tax Return?
It’s that time of year again. You know; that time when your sanity meter is pushed to the limit every day because your kids have finished off another school year and now have two and half months to chill out at home and drive you crazy. Where it was once peaceful and quiet, your home is now filled with the sounds of sibling rivalries, along with these all-too-common moans and groans ringing through the air: “I’m bored,” “there’s nothing to do,” and every parent’s favorite, “I’m hungry.” On the other hand, for teenagers, summer is also a great opportunity to earn a little cash. Most parents love the idea of having their teens get a summer job. It keeps them busy and helps them stay out of trouble, not to mention teaching them a little responsibility. However, there is one important question to consider that you may not have thought of before. Will your teen’s job affect your taxes?
Does Age Matter?
Recently, our oldest son, who just finished his freshman year in high school, has done some announcing work for a few of his school’s sporting events. I like the idea of him learning to work, but I also enjoy the nice Child Tax Credit that he and the rest of our children help us qualify for every tax season. So, I wondered how him working was going to affect my tax return. After all, I’m not ready to give up one of my dependents just yet. One of the first questions many parents have, including myself, is how old does your kid have to be to file a tax return? Well, apparently, in this case, age doesn’t really matter to the IRS. It’s the numbers that count. There is no minimum age to start filing a tax return, but the good news is there is a minimum income requirement. According to the IRS, any dependent child that earned more than $6,300 of income in 2015 had to file a tax return.
Don’t Miss Out on a Refund
So, if your kid goes to work but doesn’t make more than $6,300 for the entire year then he or she doesn’t need to file a return and you can still claim that child as a dependent on your tax return. However, filing a return could be to your child’s advantage even if his or her total income was less than $6,300. That’s because they might just be eligible for a refund. So who is responsible to file your child’s return? If your child is capable of doing it then, ultimately, it will be his or her responsibility. On the other hand, if your child is not capable of doing this alone, then you must help, or include that income on your own return.
So what about filing status? Anyone who works as an employee must fill out a Form W-4 before they can begin to receive those wages. Of course, your child could claim one dependent on that form, but if he or she wants to be safe and make sure that enough money is deducted then the best idea is to claim zero dependents. Unless your child makes a lot of money, then the chances are good that he or she will get most of their money back as a refund when the return is filed with the IRS come tax season.
Can I Still Claim My Child As a Dependent?
Another very common question most parents have when their dependent children enter the workforce is whether or not they can continue claiming those children as dependents. The answer is yes, in most cases, even if your child earns a lot of money. In fact, the amount they earn doesn’t really affect their dependent status. However, they cannot be claimed as a dependent by anyone else if they provide more than half of their own support. Likewise, your children cannot claim their own exemption if they can be claimed as a dependent on your return. That means that even if you choose not to claim your child as a dependent on your return, if he or she is eligible to be claimed then they cannot claim their own exemption.
Give Me the Credit
Now back to the matter of that Child Tax Credit I mentioned earlier. My wife and I love receiving that credit every year, along with the Additional Child Tax Credit. It’s a great way to pad our refund. But, will your child’s summer job affect that credit? In this case, age does matter. First off, once your child turns 17 you can no longer claim that child as part of the Child Tax Credit, whether he or she works or not. However, the good news is having a child under 17 that works won’t disqualify you from receiving the Child Tax Credit. That’s true even if your child works and pays taxes on his or her income. So, if your kids are driving you crazy this summer, help them find them a job and start teaching them about taxes now. It most likely won’t hurt your refund in any way and your sanity meter might just stay at tolerable levels.