What Are Tax Implications for Working Teens?

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If you’re a working teenager, then odds are the government is going to want their share of your earnings.  While this doesn’t always seem fair, it’s certainly a part of having a job in the 21st century.  Your federal government is the last group of people that you want on your case, especially when they start demanding their portion of your earnings, so it’s crucial that you fully understand the tax implications that come with making money in your country today.

Different countries have different taxation policies for working adolescents, and they tend to change from year to year, so it’s absolutely necessary that you research how your country’s tax policy can affect you before getting to work.  Whether you’re about to start working for an employer, or you’re starting a business on your own, getting your taxes squared away will ensure that you’re not hit with a hefty bill from the federal government at the end of the year.

In the United States, for example, teenagers that are dependent on other taxpayers (like their parents) don’t have to file an income tax return UNLESS they make more than the standard deduction for a single taxpayer that year.  Whew… got all that?

What this rule basically means is that if you don’t make more than the standard deduction for the current tax year (and it does tend to change from year to year) then you don’t pay taxes (the 2014 standard deduction is $6,200, so make less than that and you’ve got nothing to worry about).

Other countries have similar policies regarding teens and taxes.  The United Kingdom, for example, has a personal allowance of £10,000 for the 2014-2015 period before a citizen of the U.K. has to begin paying taxes on income.  In Australia, the tax-free threshold is currently $18,200, while the Canada Revenue Agency takes a different approach, encouraging all taxpayers to file annual returns.  Certain provinces allow substantial tax credits for low-income earners, but if you don’t file, then you’ll never get paid.

If you’re going to go to work for someone else, you also need to know just how they plan on filing your taxation information.  In the United States, employers can either designate employees as 1099 contractors (paying them their full hourly wage each pay period) or regular W-2 workers (where the employee goes ahead and takes money out of each check for taxes).  It’s usually best for teens to insist they get paid as W-2 workers; getting paid as a 1099 contractor can be dangerous for teens who fail to realize that they’re going to have to pay taxes at the end of the year, and may have the money spent by then.  Always make sure you know exactly how your employee plans on filing your tax information.

Getting a grasp on taxation policies as a working teenager can be quite a headache.  Each individual state, province, and country has a myriad of different tax rates, exceptions, credits and deductions, so be sure to check with your local and state government’s websites to find out more about income tax implications for you.

 

For more information on taxation policies in your area, check out some of the links below:

 

United States

Internal Revenue Service – 2014 Employer’s Tax Guide

BankRate.com – Teen Jobs and Tax Issues

 

Canada

Canada Revenue Agency – Canadian Income Tax Rates for Individuals

About.com – Check on Your Tax Refund in Canada

 

United Kingdom

HM Revenue and Customs – Personal Allowance

ParentDish.co.uk – Is Your Child Old Enough to Work?

 

Australia

Australian Taxation Office – What is the tax-free threshold?

TheKidsAreAlright.com.au – Essentials for Working Teenagers

 

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