It’s March, and the tax season is upon us. More than just upon us, it’s mere weeks away from T-day. You’ve thought about your taxes; have you thought about what your teen needs to know about taxes?
If you are a parent of a teen, you probably now know the joy of chasing down errant 1098’s! And such fun sorting through the never ending questions that the various tax software ask you about things that didn’t apply to you last year, and will probably never apply to you! It’s enough to make one reminisce about the good ol’ days. You remember: When the forms you used weren’t just easy, they were actually labeled “EZ”! Oh, the days when you were rewarded with a refund just for putting out the effort of submitting said EZ form.
Give your teen an opportunity to learn from others’ Tax Return mistakes.
Actually….come to think of it….there was that one year. You know, that year you got your first job, and filled out your first W-4 form. Filled it out WRONG, of course. Why wasn’t this something they taught in high school? Shouldn’t my parents have warned me about this?! Why did that manager I asked tell me to follow the instructions on the back instead of just telling me to claim ‘ZERO’!?! And why, oh why, weren’t those instructions written for a teenager to understand!!! Wait a minute… I have a teen that just got their first job and has to start worrying about taxes?!?
Frequent W-4 Mistake:
Apparently, taxes still aren’t taught in high school. A common mistake teens and young adults make is claiming themselves (and perhaps more than themselves), so that they can receive more money from their paycheck. Around 12 years ago, a family member of mine made the ‘W-4 mistake’ and it went uncorrected for years. Today he still owes back taxes to the IRS! Being the judgmental person that I was (I’m much better now), I mocked the situation when I found out about it; wondering how someone could possibly let this simple step go so wrong for so long. Then I asked my son (around 19 then) if he has been filling out his various W-4’s out correctly. His response: “What’s a W-4?”
So if you have kids in the workforce already (or about to be), spend a few minutes clarifying this simple step with them.
What your teen needs to know about taxes (filling out that first W-4 Form)
Rule of Thumb: Always claim ‘O’.
This allows Uncle Sam to take out a higher percentage of taxes from paychecks throughout the year. Then when they file their EZ form, they will find Uncle Sam has a nice lump of savings he’s been holding for them.
Teaching your Teen Life Skills
However, if you or your child prefers the idea of managing their own savings throughout the year (like I do), then sit down with them and go over a sample W-4. Encourage them to experiment with the various amounts available to them. Just be sure to help them through the whole process so they don’t get surprised by a big bill on T-day (like my son did, oops!).
Hopefully, 20 years from now, when your children look back longingly on easier tax times, there really will be nothing but good and EZ memories.