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| By Sholeh Patrick |
Signs that tax season is upon us
Lady Liberty and Uncle Sam are hitting the streets again.
It's become one of those Coeur d'Alene markers. Every year about this time, a local tax firm hires costumed youths to stand on Ironwood Drive and wave at cars, advertising their employer and reminding passersby that it's again time to pay the piper.
I've done mine, or at least handed off the package to my accountant. Accountants -- that pitiable breed that doesn't sleep for two months a year, looking for statutory excuses to keep more in the pockets of workers.
"Worker" means teenagers like Liberty & Sam, too. No, they generally don't owe income tax on earnings before 18 (although they may owe tax on investment income over $750), but they may want or need to file a return. Teens may be entitled to some cash back, or, if they make above the threshold amount of $5,000, they may be required to file. Filing is also a great introduction to money management and budgeting.
Take Charge America, a nonprofit financial counseling service, offers these tax tips for teens and their parents:
• Nuts and bolts: After getting a job, fill out a W-4 form with the employer. At the beginning of the following year, employees receive a W-2 form from each job held. Taxes -- Social Security and/or income -- may be taken out of each paycheck.
• Tips are taxable: Tip-based restaurant and service jobs are common with teens. Tips over $20 per month must be reported.
• When to file: If a minor receives W-2s, 1099s or other statements of income, even if filing isn't required, it's a good idea to file if wages have been withheld because a refund may be due. If the teen is 14 or older, he must sign his own return. Teaching teens how to use tax refunds wisely is another money management skill needed later in life.
• Adjust withholding: If too little is taken out of paychecks, the teen may owe on April 15. If too much is withheld, a large refund may look appetizing, but the money might have been better used throughout the year, such as earning interest in a bank account. Financial experts say it's better to adjust withholding so tax payments match liability.
Information: www.irs.gov.
Sholeh Patrick is a local attorney and a columnist for the Hagadone News Network. Send e-mail to sholehjo@hotmail.com.
