Everybody may curse tax season, but it is a burden that everybody must bear. All citizens must pay taxes on various financial aspects of their life, such as income. However, minors usually catch a break in legal terms; you may wonder how tax laws relate to their paychecks!
Yes, minors will get taxes taken out of their paycheck. If your income is above a certain threshold, the government will require you to pay income taxes, regardless of age. If a minor is working over the table and making enough money, they must pay taxes.
As with any other subject related to taxes, there are always some conditions and exceptions. If you would like more information on minors and their tax payments, read on! You will become well-versed in taxes for minors in no time.
Do Minors Pay Taxes?
Similar to everybody else, minors do have to pay taxes on any financial matters.
While minors are not likely to own property and often do not have to pay the associated property taxes, they will still have to pay all valid sales and income taxes.
In the United States of America, individuals under the age of 65 who make under $12,550 in one year are exempt from paying income taxes.
Many minors do not reach this threshold, especially if they are working summer jobs or while not at school.
In this sense, minors do pay taxes, although significantly less than what an adult with a full-time job will pay. In some cases, minors may not have to pay taxes at all!
However, if a minor works a full-time job or otherwise meets the threshold, they will have to pay taxes on that income.
An employer may take these taxes out of the minor's paycheck, or the minor may elect to pay the fee in full during tax season.
Can Minor Pay Their Taxes All At Once?
By now, we have mentioned that minors get taxes taken out of their paycheck. In a vacuum, this is true; unemployment, payroll, and Medicaid taxes will be taken out of your paycheck.
However, other options are available for federal income taxes. While laws regarding state-level income taxes may vary, federal income taxes can be paid in a lump sum during tax season.
Most payroll programs take taxes out of paychecks as a default, so the minor will have to request an adjustment to their payroll to pay their income tax in a lump sum.
In cases where minors are independent contractors, such as a middle-schooler cutting their neighbor's yards to save up money for a video game, nobody will take taxes out of their paycheck.
This exception is because independent contractors do not receive traditional paychecks, and their income often consists of individual checks paid on a per-job basis.
In these cases, independent contractors often must pay their income taxes in a single lump sum.
This significant expense can be a devastating financial blow for minors, as they may not have saved enough money to pay all of their taxes at once.
However, as with all tax-related fields, there is another way. Nothing can be easy when it comes to taxes!
The IRS offers a payment plan that allows you to pay your estimated taxes quarterly, with any overpayments or underpayments adjusting your annual tax return.
Utilizing the quarterly payment plan allows workers to keep most of their weekly paychecks at the expense of a more costly sum due every three months.
This option is great for minors, especially when not saving for a significant expense such as a car, as it gives them more money for their day-to-day operations.
Without significant bills, a minor often has a job to gain extra spending money, meaning that the spare pocket change that the quarterly-estimated plan offers can make a huge difference!
How To Fill Out W4 For A Teenager
Even if you do not expect to meet the threshold for paying income tax, you may want to fill out a certain form- the W4. W4s are one of the most famous tax forms, as most Americans will fill at least one out in their lifetimes.
In fact, most Americans will likely have to fill out several- most jobs will require a new W4 when they hire you or when any of your significant information changes.
Thankfully, the W4 is a relatively simple form, especially when compared to other tax forms from the IRS.
Filling out a W4 form for a teenager is not significantly different from filling out a W4 form for an adult, though the odds are high that an adult would not need help with this task!
The IRS was kind enough to break the W4 form into several steps in advance, making it even easier to understand this already-simple document.
Page one of the W4 is the most vital one, containing all required information for employees who do not work multiple jobs- all of the following steps are on this page, except for a small part of step two.
Step one is easy, consisting mostly of personal information. All that is required here is the teenager's name, address, marital status, and social security number.
A teenager should be able to fill this information out easily, and if they need help with any of it, it will likely be their social security number.
Believe it or not, many Americans do not have their social security numbers memorized!
While a teenager may memorize it as they begin applying to colleges, a high schooler is not likely to know their social security number off of the top of their head.
Additionally, as most teenagers are not married and are not the heads of their households, their marital status will likely be 'single.
Of course, exceptions exist; if a teenager fits the criteria for the other options, they are welcome to select them, as they may offer tax benefits.
Minors can frequently skip step two entirely, as it pertains only to people who hold multiple jobs at once or are married to a spouse who also works.
As most teenagers only hold one job and are unmarried, this section can be ignored; however, exceptions exist, as we have mentioned earlier.
Teenagers who work more than one job are given three options in section two.
A teenager who works two jobs with similar pay can simply check off a single box confirming their employment status.
The teenager must check this box on the W4 form for both jobs, as it ensures that the government can properly tax them.
The third page of the W4 form is dedicated to employees who work more than two jobs, jobs with differing levels of pay, or have working spouses.
Page three allows employees to calculate an accurate deduction for all of their jobs and is perfect for teenagers who may regularly work after-school and have a side business such as shoveling snow.
After filling out page three, a teenager can input the deductions onto the 'extra withholdings' section of step 4, but you will read more on that later.
The IRS provides an estimator that can automatically help employees find the deductions that they would otherwise manually have to estimate on page three.
This estimator is the best option for any teenager with an internet connection and a trusted device, allowing for a quick calculation of their deductions and withholdings.
It is also useful because it handles steps three and four, as well!
Step three is another step that most minors can skip as it regards dependents. Most teenagers will not have children or be the head of the household, so this step is superfluous.
In case of exceptions, this step is simple to complete, though you may want to have a calculator on hand as it involves multiplying large numbers.
If a teenager has any dependents under the age of 17, they may multiply the number of dependents by $2000.
There is also an option for dependents over the age of 17, but the likelihood of an adult being the dependent of a minor is astronomically low.
Step four is a partial continuation of step two, as page three directly leads to step four's second and third sections.
The first part of step four asks employees to list all income not from jobs, such as investments or retirement income, though this will likely not be applicable for teenagers.
The second part has to do with other deductions, which can be calculated on the third page of the W4. These other deductions include charitable donations or expensive medical bills.
The third part has to do with extra withholdings, which is the sum from step four. If you filled out the appropriate section on page three or used the IRS estimator, you will place that total here.
Step five is arguably the most simple part- all you have to do is sign it! After adding your name and the current date, hand the W4 to your employer- you have done all you need to do.
Ultimately, it is not a question of whether or not teenagers get taxes taken out of their paycheck; it is a question of if they need to.
Many minors will not qualify to pay income tax in the first place due to a lack of taxable income, and others may elect to pay their income taxes in one lump sum during tax season. Options are even available that allow quarterly income tax payments!
While minors do pay taxes, and many choose to get taxes taken out of their paycheck, it is not a cut-and-dry answer. When it comes to taxes, it seems like nothing can be simple!
Shawn Manaher is a former financial advisor, has founded 5 online businesses, and is a coach, speaker, podcast host, and author. He's been featured on Forbes, The Consults Corner on TAE Radio, The Writing Biz, What's Your Story, and more.