Help with taxes for 17 year-old employee

[aprilleigh]

I'm helping a new employee understand the tax deductions. This is his first job, and will just be here for the summer.

I figure he'll gross just under $4,000 ($9 per hour, 40 hours per week, 11 weeks). He'll be taxed at 10% for Federal, and 7% for Oregon. Since the standard deduction for Singles is $5,800, would all of his with-holdings be refunded? Or, should we figure out the allowances so nothing is withheld?

I'm leaning towards keeping everything as is (Single, 0 allowances) and letting it work at in April. But, he's 17, and I'm sure would like as much Summer spending cash as possible!

Thanks in advance for your help!

[Deleted]

If that is his only income he will not owe any federal (and probably state) taxes. He can fill out his w-4 as a exempt.

[973beachbum]

Jun 16, 2011 14:18:02 GMT -5 aprilleigh said:

I'm helping a new employee understand the tax deductions. This is his first job, and will just be here for the summer.

I figure he'll gross just under $4,000 ($9 per hour, 40 hours per week, 11 weeks). He'll be taxed at 10% for Federal, and 7% for Oregon. Since the standard deduction for Singles is $5,800, would all of his with-holdings be refunded? Or, should we figure out the allowances so nothing is withheld?

I'm leaning towards keeping everything as is (Single, 0 allowances) and letting it work at in April. But, he's 17, and I'm sure would like as much Summer spending cash as possible!

Thanks in advance for your help!

The standard deduction is only if he isn't claimed as a dependant on his parents taxes. Most 17 year olds who make 4K in the summer are still at home and claimed on mom and dad's so they can't also claim themself on theirs. To me single and zero is the safest route. just my 2 cents. ;D

[Sharon]

Is this kid going to college in the fall? My DD is 17 and working this summer. We are having taxes withheld because she may need to pay taxes because her scholarships and grants will exceed the tuition amount of school and some of it will be used to pay for housing.

I look forward to reponses from people in the know about these things since we are in the same situation.

[Deleted]

Good point about whether he is a dependent or not.

[aprilleigh]

Oooohhh, he is a dependent. Thanks for that info! It's been too long since I was a dependent....

He won't be going to college this fall; he'll be a senior in HS.

Thanks everyone!

[Deleted]

Even as a dependent it still looks like he will owe no taxes.

[bean29]

Most of our "Summer Help" claim Single and 2, Single and 1 and Single and 0.

Some have other investments, many have pretty good family income, only 1 or 2 might have to pay their own tuition.

One of my summer help guy worked on his Christmas break and did not deposit his Jan Check until May.

The only reason I would recommend he claim exempt is if he has to pay his own college tuition in fall. Otherwise the kids seem to like getting the refund check in Winter. Most of our kids don't work during the school year.

[aprilleigh]

Jun 16, 2011 14:28:36 GMT -5 ArchietheDragon said:

Even as a dependent it still looks like he will owe no taxes.

How does that work, if he can't take the standard deduction? I figure he'll need to pay roughly $400 to Federal and $280 to State.

[Deleted]

Jun 16, 2011 14:35:58 GMT -5 aprilleigh said:

Jun 16, 2011 14:28:36 GMT -5 ArchietheDragon said:

Even as a dependent it still looks like he will owe no taxes.

How does that work, if he can't take the standard deduction? I figure he'll need to pay roughly $400 to Federal and $280 to State.

Based on the calculation on the 1040ez.

www.irs.gov/pub/irs-pdf/f1040ez.pdf

[Deleted]

Pretty sure he can just claim exempt and he won't meet the income requirements for having to file. That's what DD17 and DS15 claim.

[Deleted]

Jun 16, 2011 14:21:33 GMT -5 Sharon said:

Is this kid going to college in the fall? My DD is 17 and working this summer. We are having taxes withheld because she may need to pay taxes because her scholarships and grants will exceed the tuition amount of school and some of it will be used to pay for housing.

I look forward to reponses from people in the know about these things since we are in the same situation.

Are her scholarships and grants considered income?

[Sharon]

In February when DD was a junior in HS the CPA and I had a talk about taxes, college etc. He said that any scholarship and grants that were used for college related expenses other than tutition would be taxed. Basically any money that was used for housing or books would be taxed.

This was a year and a half ago when we talked about this and what really stuck with me was if she goes over the tutition amount on scholarships and grants then we have an issue. I need to have another talk with the CPA.

[Deleted]

Jun 16, 2011 14:44:20 GMT -5 Sharon said:

In February when DD was a junior in HS the CPA and I had a talk about taxes, college etc. He said that any scholarship and grants that were used for college related expenses other than tutition would be taxed. Basically any money that was used for housing or books would be taxed.

This was a year and a half ago when we talked about this and what really stuck with me was if she goes over the tutition amount on scholarships and grants then we have an issue. I need to have another talk with the CPA.

Interesting. DD received no scholarships or grants (and won't) so have no idea.

[alabamagal]

Even if he can be claimed as deduction on parents, teenagers can still earn up to ~5000 before paying federal taxes. My son is in the same situation. If they do not owe taxes, then they shouldn't have anything withheld (I am trying to get them out of the non-YM habit of using the federal government as a savings account.)

Any scholarships that are above the amount of tuition (and maybe fees) are taxable. But I think this would just be the amount over $5000. My kids only get tuition, so we don't worry about that.

[973beachbum]

Jun 16, 2011 14:28:36 GMT -5 ArchietheDragon said:

Even as a dependent it still looks like he will owe no taxes.

Yeah I wasn't thinking about how much he would earn. I know in my state the amount of income you can have and claim exempt is higher than 4K. Most students don't just work in the summer they work a few hours all year at that age.

I think in this case I would punt and tell him he should ask his parents what they think he should do. ;D

[aprilleigh]

Jun 16, 2011 15:01:07 GMT -5 973beachbum said:

Jun 16, 2011 14:28:36 GMT -5 ArchietheDragon said:

Even as a dependent it still looks like he will owe no taxes.

Yeah I wasn't thinking about how much he would earn. I know in my state the amount of income you can have and claim exempt is higher than 4K. Most students don't just work in the summer they work a few hours all year at that age.

I think in this case I would punt and tell him he should ask his parents what they think he should do. ;D

Oh, this is making my head hurt! I filled out the 1040 EZ so I could show him "$0 Taxable Income". We went back and forth over the scenarios. But he also mentioned that he wants to get another job when school starts. We wrapped up with ... talk it over with your dad!

[bring in the new year]

Different way to approach it.

Ask him if he needed to could he write a check in April to the government? Either from his own savings or by borrowing money from his parents.

If the answer is no, then zero exemptions. If the answer is yes, then he should mark exempt for federal.

I think it's more than likely that he's exempt from federal but if he gets another job, if he had another job earlier in the year, if he has interest on college savings in his name, etc. he might not be and then I tell them better safe than sorry. Also, the one to watch out for is usually the states. Even when they don't owe taxes to the feds, they owe to the state sometimes.

Did you explain to him btw that even if he does mark exempt there will still be FICA withholding? If not, you might want to mention it. Otherwise, they can get very confused.