Tax for Teens 1 Vocab/Definitions WS

Did You Know?  Average annual income for teens: $3,  40% of teens currently save regularly  Nearly 1/3 all students work 40+ hours per week in summer  ¼ work 35+ hours per week during the school year  Average teen saves $1000 of summer wages 2 FYI: Amish pay tax on real estate and personal property and income tax on any earnings. They do not pay school tax, social security or Medicare tax.

What’s the Problem?  Teens don’t understand how TAX applies to them  Most forfeit a refund!!! 3 Is this you???

4 I’ve Got A Job! What’s an I-9 and a W-4?

Form I-9 – Employment Eligibility Verification  Proves you aren’t an illegal alien  Penalty if not one on file for each employee  Keep 3 years after employee is gone  Acceptable documents used to prove citizenship:  Passport  Voter’s registration  School or military ID  Driver’s license  Social security card 5

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So What Is A W-4?  New employees fill out this form  Tells employers how much federal income tax to withhold from paycheck 7

A Few Key Terms You Need To Know  WITHHOLDING :  Represents money that an employer deducts from paycheck to pay all or part of employee’s taxes  However, depending how much make for the year, you may not have to pay federal income tax. If this is you, you would be EXEMPT from paying 8

Can you put Exempt on your W4?  You can put “Exempt” if: 1. Weren’t required to pay federal income tax last year 2. Don’t expect to this year either (made less than $6100 { std deduction - base amount of income that is not taxed }) 3. If under 19 or a full-time student (or until 24 yr/full time) 4. CAN parent(s) claim you as a dependent?  DEPENDENT : A person who relies on another taxpayer for at least half of his or her support (food, shelter, clothing, education, etc.)  If divorced  Custodial parent (has child 1 more day than other)  One makes more money 9 Mind map

Examples:  If you live with parents and under 19, you can be claimed as a dependent regardless of how much you make.  While your parents may not choose to claim you, test is whether they CAN.  If they can claim you and you are under 19, and expect to make under $6100 in the calendar year, you will likely NOT have to pay federal income tax.  Note: If you are at least 19 but under 24, parents can still claim you as a dependent as long as you are a FULL-TIME Student! 10 In-Class Am I Exempt WS Am I Exempt WS

I don’t qualify for Exempt status – now what?  Need to fill out the personal allowances worksheet on the W-4 form!  The more exemptions (allowances) you claim, the _____ tax withheld from paycheck  Claim “____” will result in the largest amount of tax to be withheld 11 TAX TABLE See pg acct text Fill out W4 with workbook

12 Where’s All The Money I Earned?

 Payroll Taxes  Federal and State  Collected from employers and employees to provide retirement benefits ( social security, Medicare )  This amount is paid regardless of income earned  Will NOT get back until retirement 13

The Paycheck Stub MMiscellaneous Information GGross Income DDeductions MMay get refund on Fed and State NNo refund on SS or Medicare NNet Income 14

W4 qz/Am I Exempt QZ

The W-2  Must receive these by January 31 st from your employer  Summarizes  How much you made during the year ( Earned Income )  How much you paid in for taxes  Use to help fill out tax return  If error, see employer to fix 16

W-2 continued  W-2 – will have 3 copies  Your records  Attach to state tax return  Attach to federal tax return 17

Fill out w wb

19 Am I Required to File a Tax Return?

Am I Required to File a Tax Return (as a dependent)?  Due April 15!  Required? Depends… *Your income for the year *If parents can claim you, you must file if : 1.Your unearned income was over $ Your earned income was over $6100 Filing Requirement Worksheet for Most Dependents 1. Enter dependent's earned income plus $ Minimum amount$ Compare lines 1 and 2. Enter larger amt (Adjusted Earned Income) 4. Maximum Amount$ Compare lines 3 and 4. Enter the smaller amount 6. Enter the dependent’s gross total income. If line 6 is more than line 5, the dependent MUST FILE an income tax return. 3. OR if… 25

Forms?  1040EZ – simplest to file  1040 – most lengthy to file 21

How Do I File the 1040EZ? 22

How Do I File the 1040EZ?  Must meet requirements to use EZ:  Single  Claim no dependents  Taxable income < $100,000  No income other than wages, salaries, and tips (shown on W-2)  Up to $1500 taxable interest (shown on 1099INT) 23

Filling out the 1040EZ  Terminology:  Adjusted Gross Income (AGI)  Sum of wages and taxable interest  Deduction  Amount tax payers may subtract from their AGI before tax is determined (reduction in income)  Taxable Income  Part of income you must pay taxes on  Credit  Direct reduction of taxed owed 24 Fill out 1040EZ wb