While the world of work may open doors for teens financially, it also adds an element of responsibility to our lives — taxation.
The process of filing W-4s, W-2s and 1040s may seem overwhelming at first, but filing taxes is something that most people will face doing every year for the rest of their lives. Most teens have the opportunity to file the simplest of all federal tax forms, the 1040EZ. It is a simple, one-page form that can be used by individuals without dependents and can be filed electronically or on paper in a matter of minutes.
“People see taxes as a scary thing, but really they’re not scary at all. Most teens are in and out of the building within 10 to 15 minutes,” said Acacia Rodine, Greater Minnesota partnership manager at AccountabilityMinnesota, which provides free tax preparation help to people with modest incomes.
If you earned less than $5,350 in 2007, you don’t owe taxes and don’t have to file an income tax form. But you might want to. If you worked part time for a company and only earned a small amount, federal income taxes probably were still taken out of your earnings. You qualify for a refund and can get it only if you file an income tax form.
“Remember stipends DO count as earned income and you will need to file and pay taxes if your total earned income exceeds $5,350,” warned Rodine. “Let’s say for example, you worked a summer job and earned $5,000 and then received a total of $400 in stipends. Because you’re over that limit, you would have to pay taxes.”
If you’re lucky enough to have a lot of savings or investments and had more than $850 in what’s called unearned income, you must file an income tax form. And if you have both unearned income and earned income, you must file if your earned income plus $300 is more than $850.
What do taxes really mean for teens? It means that we are entrenching themselves in the American system where the government withholds a portion of our hourly wages to pay for government programs and services and for FICA, which provides funding to the Social Security system.
For teens, there is a way to minimize the amount of money withheld from paychecks. Simply complete a W-4 for your employer, stating that you are exempt from taxation because you are someone else’s dependent. The exempt status provides that only FICA will be deducted from each paycheck.
Federal and state tax forms or a request for extension must be filed no later than April 15, 2008 and a variety of filing options are available. Individuals may receive a copy of tax forms in the mail, at their local library or by going to the IRS Web site and clicking on forms.
For those who would like to file electronically and don’t want to pay a tax preparer, there are numerous free options. The most common choices are to click on the electronic free file link on the IRS Web site or to seek out free local tax assistance. In the Twin Cities and elsewhere in Minnesota, single filers earning less than $30,000 or families earning less than $40,000 per year can contact staff at AccountAbility Minnesota or 651-287-0187 to learn about free sites that provide tax preparation help.
Another option is to contact the American Association for Retired Persons (AARP), as they do free volunteer tax preparation — for all ages, not just seniors. To link to local sites, go to AARP’s Web site. AccountAbility offers appointment and drop-in locations while AARP offers phone and drop-in help.
Remember, the deadline for filing is April 15.