Teens, Taxes and Summer Jobs

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If your teen has a job this summer, you're probably thankful he's earning some cash so he doesn't come to you begging for money all the time. Uncle Sam's glad, too, because some of that money might be coming his way. That's right -- your child might owe taxes on the money he earns this summer.

Here are five things the IRS wants you to know about income earned from a summer job:

1. If your child is an employee, she must fill out a W-4, which determines the amount of tax that will be withheld from her paycheck. Use our calculator to make sure the amount being withheld is correct. Kids who are claimed as dependents on their parents' returns must file a tax return if they earn more than $5,700 from a job in 2010. If your child earned less than that, she still may be required to file a return if she earns more than $300 for the year from any investments in her name, such as from a bank account, mutual fund or custodial account.

2. Tips are taxable. If your child works as a waiter or camp counselor, for example, and receives tips, she must report that income.

3.The IRS wants to know if your child has self-employment income, for example, from babysitting or mowing laws. Your teen must pay self-employment tax -- in addition to income tax-- if he earns more than $400. Your child will need to file Schedule SE to figure self-employment tax, which includes Social Security and Medicare taxes. The rate is 15.3% of net earnings.

4. Special rules apply to newspaper carriers. They are considered self-employed if their pay is related to sales rather than hours worked and their contract states that they are not employees. Usually, newspaper carriers younger than 18 don't have to pay self-employment tax.

5. Active duty ROTC pay is taxable. However, food and lodging allowances paid to ROTC students participating in advanced training are not taxable.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Personal Finance , Taxes

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