Being a minor doesn't exempt a teen from paying taxes, but it doesn't necessarily mean they're required to file a separate tax return from their parents. As a general rule, most U.S. citizens and permanent residents need to file a tax return if they make more than a certain amount for the year.
If you are a student, you are not automatically exempt. However, you may qualify to be exempt from paying Federal taxes. Please follow the chart below to determine your eligibility.
Exemption from withholding
To qualify for this exempt status, the employee must have had no tax liability for the previous year and must expect to have no tax liability for the current year. A Form W-4 claiming exemption from withholding is valid for only the calendar year in which it's furnished to the employer.
The short answer is YES.
Employers are required to withhold federal income taxes from employees' paychecks if the employee is expected to earn more than a certain minimum threshold for the year – usually the standard deduction for their filing status.
While children younger than 19 and students younger than 24 are usually claimed as dependents on your income taxes, it's easy to help fill out a W-4 with a teen who is going to have a job.
Generally, if a minor's income does not exceed the standard deduction he or she will not be required to file a tax return. If the above scenario is true, then the minor can check the box on Form W-4 that classifies he or she as exempt from withholding.
Whether it's better to be exempt or non-exempt depends on individual circumstances and preferences. Some employees may prefer the stability of a set salary and benefits, while others may prefer the opportunity to earn more money through overtime pay.
Earned income - the part-time job question. For 2024, if a minor's earned income (like wages from that summer job at the ice cream shop) is less than $13,850, they typically won't owe taxes. However, if taxes were withheld, they might file a return to get a refund.
Employees may be considered exempt if they are paid a salary that cannot be reduced because of the quality or quantity of their work, earn less than the minimum salary requirement, and primarily perform executive, administrative or professional duties (“duties” test).
If you claim exempt on your Form W-4 without actually being eligible, anticipate a large tax bill and possible penalties after you file your tax return.
Claiming 1 reduces the amount of taxes that are withheld from weekly paychecks, so you get more money now with a smaller refund. Claiming 0 allowances may be a better option if you'd rather receive a larger lump sum of money in the form of your tax refund.
However, if you incorrectly file as exempt, you could owe back taxes and fines during tax season.
Child employed by parents.
Payments are subject to income tax withholding, regardless of the child's age. Payments for the services of a child are subject to income tax withholding as well as Social Security, Medicare and FUTA taxes if they work for: A corporation, even if it's controlled by the child's parent, or.
The same rules apply for all minors. That means if their earned income is greater than $14,600, their unearned income is greater than $1,300, or if they have both earned income greater than $450 and unearned income, a 16-year-old will need to file a tax return for 2024.
Taxes aren't determined by age, so you will never age out of paying taxes. People who are 65 or older at the end of 2024 have to file a return for tax year 2024 (which is due in 2025) if their gross income is $16,550 or higher. If you're married filing jointly and both 65 or older, that amount is $32,300.
The child must have lived with you for more than half of the year.2 3. The person's gross income for the year must be less than $4,300.3 Gross income means all income the person received in the form of money, goods, property and services, that isn't exempt from tax.
If a 16-year-old earns more than $400 as a sole proprietor, they must file a tax return and pay 15.3 percent in self-employment taxes to cover their SSN and medical payments. Also, they pay 10% if they make at least $120 a month and work for an employer who doesn't have to pay certain taxes.
Your number of qualifying children under age 17 multiplied by $2,000 will go into the first box. The number of other dependents multiplied by $500 will go in the second box. The sum of those two numbers will go on line 3.
Filing for exemption from withholding won't cause you to pay any less in taxes. If you owe taxes but file as exempt, you'll have to pay the full tax bill when you file your taxes next year. Not only that, but the IRS can charge you additional penalties for failing to withhold.
The main downside of being an exempt employee is not being eligible for overtime pay. However, for most employees, the benefits of exempt status likely outweigh the potential negative.
Exempt employees are also expected to follow their own schedules without needing to fill out timesheets or track their tasks on spreadsheets. Exempt employees are not eligible for overtime pay, and they also don't qualify for many of the benefits given to non-exempt employees, such as health and dental benefits.
Your parents still claim you as a dependent – If you are employed (whether 16 or 20), and your parents still claim you as a dependent, you might have to claim 0 on your taxes because you cannot claim yourself, since your parents already do.
If Your Child Has Earned Income Only
A child who has only earned income must file a return only if the total is more than the standard deduction for the year. Your child will have to pay tax on the salary only to the extent it exceeds the standard deduction amount for the year: $14,600 in 2024.
To claim exempt, write EXEMPT under line 4c. You may claim EXEMPT from withholding if: o Last year you had a right to a full refund of All federal tax income and o This year you expect a full refund of ALL federal income tax. NOTE: if you claim EXEMPT you must complete a new W-4 annually in February.