My son is in high school and will start his first summer job in a few weeks. What does he need to do about taxes?
First, he will need to fill out an
Generally, anyone with earned income of less than
Thomas often recommends that teens claim zero or one withholding allowance instead, in case they end up having enough earned income to owe some tax. "That minimizes the sticker shock of having a significant balance due," he says. If your son has more money withheld than he owes in taxes, he'll get a refund when he files Form 1040 next spring. For more information, see
No matter how your son fills out the W-4, he'll still have
Kids with summer jobs should also consider contributing to a Roth IRA; you just need earned income from a job to be eligible to contribute to a Roth, regardless of your age. "If parents want to really supercharge the saving and investing aspect of the summer job, they can push their children to establish a Roth IRA," says Thomas. Your son doesn't have to use his own money; you can give him the money to contribute. He can contribute up to the amount of money he earned for the year, with a maximum of
Starting a Roth when he's young can give your son a huge head start for the future. He can withdraw the contributions tax-free and penalty-free at any age, and he can withdraw the earnings tax-free after age 59½. "I have done this with my own children for the past few years, and they have become passionate savers and investors," Thomas says. For more information about Roths for kids, and some administrators that make it easy for minors to open Roths, see Give the Gift of a Roth IRA.
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Kimberly Lankford is a Contributing Editor at Kiplinger's Personal Finance magazine. .