CARL WATTS & ASSOCIATES

June 11, 2018

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Teenagers, Summer Jobs
and Taxes
This year your kids may have their first experience in the working field to see how it feels like to work and get rewarded with a paycheck.

It may also mean a source of worry for the young workers and their parents regarding potential taxes.

First of all, let us determine what the law says about youth employment. The Fair Labor Standards Act (FLSA) sets 14 as the minimum age for most non-agricultural work.


However, at any age, youth may deliver newspapers; perform in radio, television, movie, or theatrical productions; work in businesses owned by their parents (except in mining, manufacturing or hazardous jobs); and perform babysitting or perform minor chores around a private home.

Also, at any age, youth may be employed as homeworkers to gather evergreens and make evergreen wreaths. Different age requirements apply to the employment of youth in agriculture.

Many states have enacted child labor laws, some of which may have a minimum age for employment which is higher than the FLSA. Where both the FLSA and state child labor laws apply, the higher minimum standard must be obeyed.

As you probably know, when it comes to income, the IRS generally wants its cut, regardless of the earner’s age. But some special tax rules apply to young workers, based not only on age, but also on amount of money earned and even the type of job.

A youngster who is a dependent of another taxpayer generally doesn’t have to file an income tax return unless the youth makes more than the standard deduction amount for a single filer.


If they are someone else's dependent for tax purposes, then a lower standard deduction of $1,050 applies.

Those dependents who have earned income can qualify for a higher standard deduction that's equal to their total earned income plus $350, up to the normal standard deduction amount for the dependent.


If you don’t know already, for 2018 the standard deduction is $12,000 for a single person.


Here is some useful information about the tax implications of summer jobs that your kids should know.

As a new employee, they need to fill out a Form W-4, Employee’s Withholding Allowance Certificate. Employers use this form to figure how much federal income tax to withhold from workers’ paychecks. It is important to complete W-4 form correctly so your employer withholds the right amount of taxes.

If they receive tips as part of their income, remember that all tips received are taxable. They should keep a daily log to record the tips. If they receive $20 or more in cash tips in any one month, they must report their tips for that month to their employer.

Maybe they’ll earn money doing odd jobs this summer. If so, keep in mind that earnings received from self-employment are subject to income tax. Self- employment can include pay they get from jobs like baby-sitting and lawn mowing.

Even if they don’t earn enough money from their summer job to owe income tax, they will probably have to pay Social Security and Medicare taxes. Their employer usually must withhold these taxes from their paycheck. Or, if they’re self-employed, they may have to pay self-employment taxes. Payment of these taxes contributes to their coverage under the Social Security system.

If they’re in ROTC (Reserve Officers Training Corps), their active duty pay, such as pay received during summer camp, is taxable. However, the food and lodging allowances received in advanced training are not.

If they’re a newspaper carrier or distributor, special rules apply to their income. Whatever the age, they are treated as self-employed for federal tax purposes if:

  1. They are in the business of delivering newspapers;

  2. Substantially all their pay for these services directly relates to sales rather than to the number of hours worked;

  3. They work under a written contract that states the employer will not treat them as an employee for federal tax purposes.

If they do not meet these conditions and are under age 18, then they are usually exempt from Social Security and Medicare tax.

Students who have earnings from a job, sell stock, have self-employment income, or receive pension income as a beneficiary, must file their own tax return and can't include their income and tax withholdings on a parent's tax return.


As parents, you can find some useful information for you too in the following.

If your child is working or receiving income other than interest and dividends, they must file their own tax return. The taxes on their wages or self-employment taxes are based on their own tax rate, usually not more than 10 percent tax rate while the investment income is taxed at the same rate the parents pay.

Your dependent child can have any amount of income and still be claimed as a dependent as long as they do not provide more than half their own support. This includes gifts, entertainment, food, shelter, clothing, purchasing a vehicle, maintaining a vehicle, other forms of transportation and school expenses.

Each dependent child under the age of 17 can qualify you for the $1,000 per child tax credit. The credit is available to you even if your child is working and paying taxes on their income. Unfortunately, the year your child turns 17 the tax credit is no longer available.

Remember, the amounts a child earns by performing services are included in his or her gross income and not the gross income of the parent. This is true even if, under local law, the child's parent has the right to the earnings and may actually have received them. But if the child doesn't pay the tax due on this income, the parent is liable for the tax.

If your child has a large amount of investment income or self-employment income instead of, or in addition to, a job, their tax return can become quite complex and it would be a good idea to talk to a tax professional.
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