Teenagers who work in the US must pay taxes on their earnings. They can even begin to make contributions towards social security benefits. It is therefore not too much to ask, “are teenagers also entitled to getting tax refunds?” Let us know about “Teens Taxes”
The quick answer to this question is, yes. The reason is not far-fetched because these working teenagers are basically doing what adults are doing – working and filing tax returns with the Internal Revenues Service (IRS). It is therefore not an anomaly when they get a tax refund if their employer had overbilled them for tax payments in the first place.
However, what qualifies a teenager for a tax refund may not be the same for adults. Let’s take a brief look at those working teenagers who may be due for a refund from the IRS and how they have to go about getting it.
Types Of Working Teenagers
According to the Internal Revenue Service, working teenagers are classified under two broad categories: independent contractors or self-employed and employees.
- Independent contractors or self-employed – teenagers have been known to venture into one business or the other either while still in school or during breaks, e.g., summer breaks. Some have even set themselves apart in the social media world by becoming social media influencers at a very young age. You could also be a young inventor who is making some money on whatever you have invented or built.
Whatever way you are earning your money as a young entrepreneur, you are required to pay the self-employment tax. You should however check the IRS guideline to be certain you are categorized as a self-employed or an independent contractor by the government before you do so.
Also, you must have been earning up to $400 in profits before you are required to pay the self-employment tax.
- Employees – summer breaks and long holidays are used for touring the world and sightseeing but most teenagers tend to use the time to work for small or big businesses. Interning at a company that pays you also count as being an employee. When you are in this category though, your employee is obliged to pay your tax return on your behalf. You do not have to do it by yourself.
How Teenagers File Tax Returns?
US citizens and non-resident alien teenagers are required to file a tax return with the IRS when they are entrepreneurs. For US citizens, fill in Form 1040-ES while non-resident aliens are required to fill the Form 1040-ES (NR).
The e-filing option is available to young entrepreneurs to file their tax returns by themselves without the help of their parents. Simply make use of the IRS portal and when you are ready to pay, pay through your online account or the IRS’s Direct pay.
Unlike opening a bank account or being allowed to drink alcoholic drinks, there is no age limit for filing a tax return. In other words, teenagers and young adults can sign their file returns on their own.
When Teenagers Are Due For A Tax Refund?
As a teen entrepreneur, you could be due for a tax refund if your employer did not factor in estimates for your tax withholding rights. Normally, you should have used the tax withholding estimator on the IRS portal to calculate how much you can withhold from your earnings before paying tax on the rest. Peradventure you were not aware of this at the time, you could file for a tax refund.
However, non-resident aliens are not allowed to use the withholding estimator which may imply that they are not eligible for a refund. Also, since teenagers are listed as dependents anyway and they do not have dependents of their own, how much they are due to be refunded may be very low.
The IRS does not presently make public how much refund it makes to the teenage working population of the US, so the median estimate of a particular figure is not possible at this time.
Conclusion For Teens Taxes
Now we have learnt “Teens Taxes”, When you hear of the tax refund to adults, it does sound like a good thing especially when the amount is huge. However, since the expenses of an adult often overweight that of teenagers, the amount you are due for a refund may not be worth claiming at the end of the day. You should still check out the tax withholding estimator to be sure though.
- Are parents allowed to pay tax on behalf of their teenage entrepreneurs?
The government stipulates that parents are not allowed to claim their children’s income on their own tax returns. As soon as your teenager starts earning up to $400 in a year, they should file their separate tax return.
- How can a teenager minimize how much they own in tax payments?
Since tax payment is the same as adults, teenager entrepreneurs are allowed to make certain deductions from their earnings. This ensures that they only pay tax on their profits.
- What expenses are teenagers allowed to deduct from earnings before paying tax?
Deductions that teenagers can make from their earnings before filing tax returns include capital expenses (including startup expenses as well as business assets and improvements) and the production cost of goods sold.