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How To Help Your Teenager Understand Taxes

Jul 16, 2008
Teenagers tend to take life very literally. For example, when they get a job, a teenager expects to earn the exact amount they were offered. Life doesn't work that way, however, and you can assist your teenager in getting accustomed to it by helping them to understand taxes.

Regardless of the amount of money you earn, everyone is charged income tax. By means of these taxes, the government is able to produce funds that provide beneficial services to citizens and finance military efforts.

For your teen, the hourly wage gives them an idea of what they will earn for the hours worked during a pay period. This number is not the amount that they will receive on pay day, however. Prepare your child by telling them how the income tax system works.

When a teen gets a job, they will have to complete a tax form that they probably will not understand. Tax forms must be filled out properly because the government will use that information when determining how much and which taxes to take out of their paycheck. For these reasons, parents need to help their teens understand the details of tax forms and assist them as they fill them out.

An individual is not required to file their taxes if they earn less than a specific amount that has been set by the government. Most teens who work fall into this category and are therefore tax exempt, especially during their first year of work.

Parents should help their teens to maximize their earnings by claiming any and all applicable tax deductions. For example, being included as part of your parents' tax returns is a tax deduction that will help them keep more of the money they have worked hard for. This is a good move, because most teens will not be filing their taxes.

As teens grow older and begin to earn more and more money, the way they handle their taxes will change. Help them to understand that they should do all they can to benefit from the brief time period when they will not be taxed, since this will not be the case once they begin to make more money and have to file for and pay additional taxes.

Many teenagers earn money self-employed by selling things on eBay, babysitting, and doing other jobs. These earnings could potentially put your teen at an income level that requires them to file taxes. You can find out what the limit is for being eligible to not file taxes. It would also be wise to explain some of the various tax forms to your child and motivate them to save money, since it is possible that they will owe the IRS taxes.

Teaching teens about taxes from the very beginning of their working life will help them be prepared to handle this reality. Discuss with them the need to keep good track of the money they earn so that at the end of the year they will be able to determine whether or not the government requires that they file for taxes.
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