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Summer Employment?  Don't Pay Too Much to the IRS

Summer Employment? Don't Pay Too Much to the IRS

June 11, 2017

If your child has secured a job this summer help them to avoid paying too much to Uncle Sam.  Each year many students have taxes withheld from their paychecks that should rightfully be paid to them.  We all know how painful it is to see our paychecks reduced by the taxes we pay at the Federal and State level, why let your children have more withheld than they should?

When filing IRS Form W-4 with an employer, children should pay special attention to the instructions regarding exemptions from withholding taxes.  A working child will generally owe no income taxes unless wages earned exceed $6,400 (in 2017) or their investment income exceeds $350.  According to the instructions provided with Form W-4:

Exemption from withholding.  If you are exempt, complete only lines 1, 2, 3, 4, and 7 and sign the form to validate it.

And specific to line 7, the instructions continue:

I claim exemption from withholding for 2017, and I certify that I meet both of the following conditions for exemption.

  • Last year I had a right to a refund of all federal income tax withheld because I had no tax liability, and
  • This year I expect a refund of all federal income tax withheld because I expect to have no tax liability.

If you meet both conditions, write "Exempt" here. 

If your child has already filed a Form W-4 with their employer without indicating the correct filing status, they should ask their employer to amend their responses by filing a new Form W-4.

By avoiding the payment of unnecessary withholding taxes your son or daughter will be able to keep more of their hard-earned paycheck now.  It may also eliminate the cost and effort of filing a tax return at the end of the year to claim their refund.

Making their paycheck stretch is difficult enough for a young worker.  Why make it any more challenging than it has to be?