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Teen Summer Jobs | Are You Exempt From Federal Withholding?

6 min read

6 min read

Editor’s Note: Finding a summer job is great for many reasons, but sometimes teenagers just don’t know where to begin. Learn more about teen summer jobs and helping to fill out Form W-4 for minors — see if you (or your child) is exempt from state and federal withholding. 

Helping Working Teens

Working part-time while in school is a great way for teens to build up future savings. Even if your teen won’t be making enough to cover the kinds of expenses they’ll have in the future, earning money through part-time or summer jobs will still make an impact.

teen taxes piggy bank

While this job will not cover their college tuition, it can help your teen finance other student-related expenses, such as textbooks, transportation, groceries, and dorm furnishings. These are all expenses that can eat up loan money and add to the eventual interest.

When it comes to finding a summer job, have your teen first ask friends and family that may be able to assist them. Maybe it is a friend who works at the local café. Or, perhaps a family member is a doctor or other professional who needs help answering phones at the office. This is an appropriate first step to test the waters and see what is out there within reach.

If their contacts can’t assist with the job search, it’s time for them to move their efforts online. Ask that they gather a list of places they could see themselves working. Perhaps there’s a local restaurant they like, or a nonprofit organization that lines up with their interests. Maybe they’ll want to take advantage of good grades and tutor other students. Regardless, having a list of potential job opportunities is a key first step to jumpstarting the process.

Whatever job opportunity your teen might choose to pursue, they will need a resume, which should outline their academic and, if applicable, professional successes. They should be sure to include any academic awards, relevant coursework, leadership opportunities or accolades at student clubs and volunteering opportunities. Highlighting these successes is a lesson in marketing themselves for employers and will help them stand out from the crowd.

W-4 For Minors

As you embark on your new work endeavor, be sure to keep these frequently asked questions in mind:

1 – “Do I Have to Fill Out a Form?”

On your first day of work, even as a teenager, your employer may ask you to fill out 2020 Form W-4. This form, the Employee’s Withholding Certificate, is used by employers to determine the amount of tax that will be withheld from your paycheck. Your manager, your parents or an HR representative will be happy to walk you through it.

And if you’re juggling more than one summer job, the IRS advises you, “Adjustments to your withholding usually should be made to avoid owing additional tax, and potentially penalties and interest, when you file your tax return.”

2 – Your Tips are Taxable

Did you get a tip for your outstanding service? Surely you did, because you’re awesome. But the IRS wants you to know this: “All cash and non-cash tips an employee receives are income and are subject to Federal income taxes.” You’ll definitely want to keep track of your tip income. An easy way to do that is to use Form 4070A, Employee’s Daily Record of Tips.

3 – “Am I Exempt from Federal Withholding Even with an Odd Job?”

If you mow your neighbors’ lawn, babysit the cousins, get some cash for cleaning the community pool, or do other side jobs you may wonder, “am I exempt from withholding?

These are “earnings you receive,” and yes, they’re subject to income tax. Be sure to keep track of the amount you earn. When it comes time to file your tax return, you’ll need that information.

You may use Form W-4 to claim exempt from withholding if you meet the following conditions:

  • You owed no federal tax in 2019, and
  • You expect to owe no federal tax in 2020

You will likely expect to owe no federal tax in 2020 (and you won’t have to file a federal income tax return) if your income is below the filing requirement for your age, filing status, and dependency status, and no other filing requirements apply.

4 – Stay on Top of Employment Taxes

Even if you do not earn enough this summer to owe income tax, you’ll probably end up paying self-employment taxes — social security and Medicare tax that contribute to the social security system.

Generally, your employer will withhold these from your paycheck. But, per the IRS, “You usually must pay self-employment tax if you had net earnings from self-employment of $400 or more.”

Want to know how much you’ll owe come tax return time? Check out this free tax return calculator and estimator to see how much you’ll owe or if you’ll be getting a tax refund.

Additional questions about taxation of your summer or part-time gig? Make an appointment with a tax professional for more information and guidance.

How to Help Fill Out a W-4 with a Teenager

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.

So, if you’re wondering how to fill out the new W-4, here are some steps to do so. Most likely, your teen will only need to complete the easy Steps 1 and 5, which is just including their personal information and then signing it.

Step 1

  • Print your dependent’s name and address in the appropriate boxes of the W-4 form.
  • Neatly print the child’s Social Security number in the correct box.
    • If your child’s name is different from the one shown on his or her Social Security card, your teen may need to contact the Social Security Administration to ensure he or she gets credit for his or her earnings.
  • Check the “Single” box if the child is single.

Step 2

  • Step 2 will only need to be completed by your teen if they have more than one job; for example, a job where they receive a paycheck as well as doing some side hustle jobs like doing yard work. This ensures that enough withholding for both jobs would be withheld from the paycheck job.

Step 3

  • Your teen will only need to fill this out if he or she has dependents

Step 4

  • This step is optional; if your teen has other nonwage income or deductions, or wants extra withholding withheld from his or her paycheck.
  • Your child may be exempt from income tax withholding if in both the prior year and the current tax year the teen owes no federal income tax.
    • If so, write “Exempt” in box 7 on the 2019 Form W-4, or write “Exempt” in the space under line 4(c) on the 2020 Form W-4.

Step 5

  • All your teen has to do here is sign!

Instruct your child to sign and date the form and return it to their employer.

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