Payday & Tax Expectations For Teens

An excellent time to discuss taxes and withholdings with your teen is at the start of his or her employment when he is filling out a W-4 tax form. Instruct your teen to bring the form home rather than attempting to fill it out at work. This is a great time to explain each line item and go over the following information. If your teen has already begun to work, ask him to get a new W-4 tax form from the human resources representative at work and bring it home to be sure it is accurate and your teen understands the information.

A part-time or summer job is typically a teen’s first introduction to the notion of paying taxes. Most teens will not have to file a tax return if they are claimed as a dependent on another taxpayer’s return (typically a parent or guardian) and their total earned income is less than the standard deduction, which will be $6,300 for 2016 tax filing. 

If the teen’s gross income is determined to be less than $6,300 it’s best to claim “Exempt” when filling out the W-4 form provided by the employer. This will ensure that no federal or state income taxes will be withheld and a personal tax return will not have to be filed.  If the teen’s earnings are expected to be more than $6,300 per year, claiming “single 0” status is the way to go.

Be sure to educate your teenager that all workers, no matter the age, are subject to Social Security withholding at 6.2 percent, and Medicare withholding at 1.45 percent. These amounts are automatically withheld from the gross payroll at a combined rate of 7.65 percent. In addition, California requires most workers to be subject to State Disability Insurance (SDI) at a rate of .9 percent (2016). Other deductions, such as health insurance or retirement, are voluntary and generally do not apply to most teens.