- When I was young, my dad used to make me file taxes for my babysitting money.
- My college-aged son received W-2s in the mail, and I contacted an expert to help me.
I have to admit that April has me feeling kind of angsty this year. While the lengthening days and increasing sunshine that go hand in hand with spring are a welcome respite from winter in the Northeast, mid-month looms on the horizon. As a gig worker and 1099 employee, the mere thought of tax season makes me cringe. Add a pair of teenage wage earners to the mix, and we're feeling flummoxed by the looming financial bull's-eye that is mid-April.
While I'm not as diehard as my own dad — who way back in the '80s insisted I declare my babysitting money via paper forms (which I filled out by hand with a No. 2 pencil at the dining-room table during March break) — I found it impossible to ignore the trio of W-2s that arrived in January for my 18-year-old college student.
Like most parents in my shoes, I could really use a teen tax primer — so I reached out to an expert with an open-ended question: When should my teen start filing taxes?
There are limits to what gets reported
"If the young person's 2022 earned income or W-2 wages is $12,950 or less, they don't even need to file an income-tax return — they're exempt," said Karla Dennis, the founder and CEO of Karla Dennis & Associates.
If that same young person has unearned income in excess of $1,150 — defined by Dennis as "money they made but didn't have to physically work for," such as proceeds from the sale of cryptocurrency, for instance — they are going to need to file a tax return. Ditto for any cash earned via side hustles and odd jobs in excess of $400 that's not reported on a W-2.
Dennis, herself a parent of four, views the conversations as educational. "It's a great lesson, their first financial lesson — how to be compliant with the revenue department," she said — and that includes something as simple as babysitting money that in this day and age is easy to track.
"We live in an electronic world now," said Dennis, pointing to a proliferation of bill payments, Venmo transactions, and electronic money transfers — all of which are tracked by the IRS. In other words, if there was ever a time for full financial transparency, that moment has arrived.
It's a great time to start teaching about finances
Dennis underscores the importance of engaging young people in meaningful conversations about the importance of paying taxes and, more specifically, instances where tax dollars are at work in their communities. Amenities from libraries and public parks to schools and emergency-response teams are funded by tax revenue. As such, Dennis suggests empowering teens to tackle their income taxes independently.
"Young people are so tech savvy, they should definitely file their income taxes themselves," said Dennis, who suggests pointing teens toward free online-filing services, like those available through irs.gov.
Being mindful of deadlines (from when tax documents should be available to the cutoff for filing without penalty) is another important piece of the puzzle in an increasingly online world where W-2s may not be mailed, for instance.
"Filing for an extension with the IRS is an extension of time to file, not an extension of time to pay," said Dennis of an often misunderstood scenario among taxpayers regardless of their age.
In the end, young people are like sponges. If they witness adults agonizing over paying taxes and complaining about the unpleasant process, they will likely follow suit. In this way, filing income taxes is not unlike going to the dentist.
"Young people need to understand that when you earn money, you have obligations, and the first is to pay your income tax," says Dennis. And parents can help make the tax process pain-free for their progeny — a gift that keeps on giving.