Is your teenager planning to get a job this summer? About one-third of children between 16 and 19 work during their summer break, according to the Pew Research Center. But what do they need to know about the financial side of life in the workforce? The Pennsylvania Institute of Certified Public Accountants (PICPA) gets teen workers and their parents up to speed on taxes and summer employment.
Plan for taxes
Students may hear a lot about taxes at the dinner table or in the news, but a summer job will likely be their first experience in actually paying taxes. As a result, they may be surprised when they receive their first paycheck and find that it’s not quite as much as they expected. If they have big dreams for using or saving the money they earn, it’s important that they know how much money they’ll actually take home and how much will be withheld each week so that their plans remain on course.
Get the information you need
Employers generally ask every worker–including temporary summer help–to fill out a federal Form W-4 and a state Form W-4 (if applicable), which gathers information about them and is used to calculate the amount of federal and state income taxes that should be withheld from every paycheck. Even if the employee doesn’t earn enough to owe federal and state income taxes, employers typically must withhold Social Security and Medicare taxes. An employee’s first paycheck, which should detail how much is being withheld for various taxes, will provide a great deal of information and make it easier to budget for the rest of the summer.