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Kids and summer jobs: Some tax reminders

Filed Under: Taxes on July 07, 2010

Are your children working at summer jobs this year?
If so, here are some tax reminders.

* If a child did not owe any income tax last year and
  doesn’t expect to owe any this year, the child can
  claim “exemp.” when completing the federal withholding
  allowance form (Form W-4). This will eliminate having
  federal income tax withheld from his or her paychecks.

* For 2010, your child can earn as much as $5,700 without
  owing federal income tax. There will still be
  withholding from your child’s paycheck for social
  security and Medicare tax.

* As long as you provide more than half of your child’s
  support, you can still claim the child as an exemption
  on your 2010 tax return.

* Earnings from a summer job will qualify a child to
  contribute to an IRA - up to $5,000 or the child’s 2010
  earnings, whichever is less. If your child would rather
  spend his earnings than save for retirement (and most
  would), you could provide all the cash, or agree to
  match what your child saves. As long as the amount
  put into the IRA doesn’t exceed the child’s wages
  (or the $5,000 limit), it doesn’t matter where the
  cash comes from.

If you have questions about taxes and your child’s
summer job, give us a call.

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