Teens in Pennsylvania might need to file tax returns. They must file if they have made over $1,250 in unearned income or over $13,850 in earned income. The thresholds may change based on the tax year, so always check the current limits.
Some teens may be able to claim a tax refund even if their income is below the filing requirement. You might want to check if this is the case and guide your teens through the process of filing so that it will be easier for them once they are adults.
Tax issues that the self-employed face apply to all ages. Teenagers may owe self-employment (SE) taxes if they are contractors or self-employed. This holds true even if they didn’t earn enough to meet the standard filing threshold. If they owe self-employment taxes, then they need to file.
Self-employed individuals owe SE taxes if their net earnings exceed $400. Teenagers can deduct business expenses just as adults can. You may want to learn about the possible deductions to help them save money and learn how to file this way if they continue along the self-employed path as adults.
Exemptions for teens
The IRS has a few exemptions for self-employed teens. They don’t owe taxes on certain types of services, including babysitting, lawn mowing and newspaper delivery. Vendors and distributors don’t owe taxes either.
The family business
If your teen was working at your business, then you may receive tax benefits. You don’t need to withhold their FICA taxes if your business is unincorporated, and they are under the age of 18. Paying them more than the filing trigger amount, however, would require withholding.
Teens aren’t exempt from certain tax filing requirements, although there are some special rules in place. In some situations, a teen could receive a tax refund even if he or she didn’t need to legally file a return.