How To Help Your Teenager Understand Taxes
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by: WilliamBlake
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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.
It is important for your teen to understand that an hourly wage is not an exact way to calculate their weekly income. Explaining how income taxes function will help them comprehend why their hourly wage can only provide an idea of how much they have earned during a day of work and that the number of hours they work multiplied by their hourly wage will not be the same number they will see on their paycheck.
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.
Show your teen how to get the most money that they can on their check. Even teens are allowed to claim deductions. They can claim one deduction even if they are included on their parents' tax return. That deduction will net them more money in their pocket. Since they won't make enough to file, this is a wise decision for them to make.
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.
Taxes can be a shock for teens when they open their first check. Discussing the matter with them when they take on their first neighborhood job will prepare them for the eventuality. Foster the idea of good record keeping so it is easy to find out if they need to file or not at the end of the year.
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