Thursday, May 29, 2014

Tax Reminders for Students with Summer Jobs

Students may not have to withhold any federal income tax from their wages if they did not owe any federal income tax last year and do not expect to owe any federal tax this year. This applies to students who can be claimed as dependents but their unearned income (i.e., interest, dividends, capital gains) must be $350 or less and their total income cannot exceed $6,200. However, if their investment income is more than $350, total income cannot exceed $1,000.

Another idea is for parents to hire their children to lower their tax bill as well. No FICA tax is due if a sole proprietorship, or single member LLC electing to be disregarded for income tax purposes, hires their kids who are under 18. Payments to kids also cut parent’s income and federal unemployment tax is not owed on their salaries until they hit age 21.

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