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A Basic Guide to Teenagers and Tax Returns | XL Financial Blog

A Basic Guide to Teenagers and Tax Returns

Posted on 22. Mar, 2016 by in Financial Planning

Getting a first job is an exciting time for a teenager, but that excitement can turn to stress when tax time rolls around. Teenagers who are employed might or might not have to file a tax return, but even when they don’t have to, there are times when they might want to because they could be entitled to a refund.

The first consideration is whether the teenager can be claimed as a dependent on someone else’s tax return. A teen who lives with his or her parents, is under the age of 19 (24 if a full time student) and who does not provide more than half of their own financial support can usually be claimed as a dependent by their parents. Each individual can only be claimed once; either on their own tax return or on someone else’s. So if a teen is claimed as a dependent on their parents’ return and they file their own return, they must indicate on their own return that they are claimed by someone else.

A teen is not required to file unless they have earned income of more than the standard deduction for the tax year ($6,300 in for 2015.) If they have unearned income such as interest or dividends, they must file a return if that amount is more than $1050. If the teen has only unearned income of that amount or higher, rather than having the teen file their own return, the parents could choose to put the unearned income on their tax return.

For a teenager with a job, filing even if not necessary could result in a tax refund. Usually if a teen is the dependent of their parents, they list zero personal allowances when they fill out a W4 form for their employer. This means more tax is withheld; usually more than is actually owed, so a refund is likely at tax time.

Things can be a bit more complicated when a teen has both earned and unearned income. Consulting a tax professional is usually a good idea when the income situation poses questions that can’t be answered by reading the general rules.

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