Posted on July 06, 2005 at 16:53:03:
A summer job is a great learning experience for a youngster: a step into the adult world, a chance to have money in their pockets—and some tax savings opportunities, too.
A teen who did not owe any tax last year and doesn’t expect to owe any this year may avoid withholding taxes. Just write “Exempt” on line 7 of the W-4 form. If the child qualifies as a dependent, no withholding is required if unearned income is $250 or less and total income doesn’t exceed $4,850. For those whose investment income tops $250, the earned-income limit is $800.
Here’s a great opportunity: a Roth account that can really grow by retirement time, completely free of taxes. It doesn’t matter who provides the contribution of total earnings, up to $3,000.