School is letting out and your children may have summer jobs lined up. Whether they are working part time or full time, it is possible that you have not considered your child needing to file taxes, let alone pay taxes. If your child is starting their first job this summer, these tax tips are sure to help:
How does my child fill out a W-4?
As you know from your own job, a W-4 is filled out based on the number of exceptions you will have on your tax return and will change the amount of withholdings on your paychecks. If you are claiming your child as a dependent, usually the most beneficial tax strategy, your child will typically only have one exemption. This may be different for some individuals, so be sure to read all instructions. Note that you do not typically want to fill out Box 7 as “Exempt” if your child will have more than $1,000 total income.
Does my child need to file taxes?
If your child earns more than his or her standard deduction, $6,100 in 2013, he or she is required to file taxes. However, even if your child will have $0 tax liability, it is likely they will want to file taxes. This will make them eligible for a full refund on all withholdings. Not filing their taxes can mean foregoing this refund.
Will my child’s income affect my tax return?
No. Your child’s earned income will have no bearing on your own tax situation. However, if you apply for a property tax adjustment when you file your taxes, you will need to remember to include your child’s income as part of household income. Be sure to tell your tax return preparer about any income your children have earned before claiming this adjustment.
If you have questions on your child filing taxes, please contact our office at (802) 878-1963. Davis & Hodgdon Associates has been assisting businesses in the Burlington Vermont Metro area for more than 20 years. The firm provides tax planning and compliance as well as a complete menu of business services including succession planning to businesses of all sizes.
Alyssa McBride, Associate Accountant
Davis & Hodgdon Associates CPAs