Helping Teens to Understand Taxes
Author: WilliamBlake Total views: 29 Word Count: 521
Teenagers tend to take life very literally. For example, when they get a job, a teenager expects to earn the exact amount they were offered. Life doesn't work that way, however, and you can assist your teenager in getting accustomed to it by helping them to understand taxes.
Regardless of the amount of money you earn, everyone is charged income tax. By means of these taxes, the government is able to produce funds that provide beneficial services to citizens and finance military efforts.
For your teen, the hourly wage gives them an idea of what they will earn for the hours worked during a pay period. This number is not the amount that they will receive on pay day, however. Prepare your child by telling them how the income tax system works.
When they gain employment, their employer will give them a tax form to fill out. They probably won't understand it, so parents need to help them fill it out and explain what it means. The state and federal government determines how much money to take through taxes from the information recorded on the form.
For teens with a job, the earning potential is not enough to file a tax form on April 15th of the following year. There is an amount that, if a person's earnings fall below it, they are not subject to income tax filing. Your teen will almost surely fall in that exempted category.
Show your teen how to get the most money that they can on their check. Even teens are allowed to claim deductions. They can claim one deduction even if they are included on their parents' tax return. That deduction will net them more money in their pocket. Since they won't make enough to file, this is a wise decision for them to make.
As teens grow older and begin to earn more and more money, the way they handle their taxes will change. Help them to understand that they should do all they can to benefit from the brief time period when they will not be taxed, since this will not be the case once they begin to make more money and have to file for and pay additional taxes.
Babysitting and other self-employment is subject to taxes if they make over a certain amount of money. Selling items on eBay could push your teen over the allowable limit for non-filers. In that case, discuss the forms needed to be filled out at tax time. Encourage your teen to save their money wisely in case the IRS deems that they owe tax money. Check with the IRS website to find out what the income limit is for the current filing year.
Teaching teens about taxes from the very beginning of their working life will help them be prepared to handle this reality. Discuss with them the need to keep good track of the money they earn so that at the end of the year they will be able to determine whether or not the government requires that they file for taxes.
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