Making Finances Simple. Changing Lives.
There comes a time when your dependent kids begin working, either while they’re still at home or off to college. We have a nice trick to help you avoid having to file a tax return for most of them.
Many teenagers and young adult dependents work summer jobs or work jobs while off at college. Then they get W2’s for those jobs and aren’t sure what to do with their taxes.
That’s when they call their parents (or more likely these days, send a text!).
Then, that’s when the parents call us!
We’re asked if a tax return filing is necessary. Usually the kids’ income is below thresholds for the filing requirement. However, there are often withholdings on that W2 that make filing advantageous (in order to get back the withholdings).
Rather than have to file a tax return to get those withholdings back (and incur tax prep & filing fees), we suggest instead that your kids claim exempt on their W4 for withholdings.
As long as your dependent’s earned income is less than $12,400, there is no tax return filing requirement. So it’s advantageous in this case to have the dependent claim exempt in this case.
NOTE: the above filing requirement info only applies to earned income. A return must also be filed if unearned income exceeds $1,050.
For more info on claiming dependents, click here.