I was not implying any of the things you are ascribing to my post.
And was responding to the OP, not to you.
Although doing one’s taxes is both time consuming and sometimes head-scratching, learning to do them as a teenager is the best way to teach financial literacy (IMHO). I was taught to do my own taxes at age 16 with my first job. A year later, my parents helped me research and buy one share of stock. A year after that I applied for a credit card. By the time I graduated from college- and was in my first (very low paid job) I understood how and why to begin saving for retirement, how to understand my paystub, how to use employee benefits, etc.
I know many adults who cannot do their own taxes-- and we’re not talking Donald Trump level of complexity. As a result- they have only a vague understanding of their own assets. And often (although not always) they compound that with a poor understanding of how retirement, savings, investment, capital gains operates. I have several divorced friends who learned belatedly that they couldn’t afford to stay in the house that they fought aggressively to keep (they didn’t understand how property taxes work nor did they know that they’d been paying them all these years).
It may seem crazy to invest hours in helping a HS kid figure out if he is actually making money on Ebay. But you are doing him a huge favor down the road. Having a solid understanding of the after-tax implications of his financial life is a phenomenal lesson a parent can give a kid.
For every material thing my parents couldn’t provide for me or my siblings, they somehow managed to provide knowledge and education in its place. I remember the first consumer complaint letter I wrote (I was maybe 15? something I bought which fell apart in an hour) and how proud my dad and I were (he helped me write the letter) when the company sent me back my money with an apology. Was it worth his time? I’m certain not. Which of course is why most people don’t complain about shoddy products… takes time to write the letter, easier to to just throw the thing away. But what a gift to give your kids.
That story doesn’t say that earnings from “odd jobs/ shoveling, lawn work” are exempt from income taxes and not reportable. It says what posts in this thread have already said: earned income on a W-2 of less than $6,300 falls within the standard deduction for a single person claimed as a dependent on someone else’s return and therefore is not subject to income tax; self-employment income of more than $400 needs to be reported so that self-employment tax can be paid.
A kid who mows the neighbor’s law and makes more than $400 in a year doing it needs to file a return to pay self-employment tax. It is reportable. If the yearly income is more than $6,300, the excess over that amount will be subject to regular income tax (again, assuming the taxpayer is a single person claimed as a dependent on someone else’s return).
There is no non-reportable exemption for odd jobs/ shoveling, lawn work that comes under any kind of “household” work IRS exemption that you cite. Income from those kinds of jobs is treated just like any other kind of income by the IRS.
per Belknap>>>A kid who mows the neighbor’s law and makes more than $400 in a year doing it needs to file a return to pay self-employment tax. It is reportable.
Not according to the link I previously posted.( see highlight below) But I am not an accountant nor trying to have a discussion on the morality of rounding off your reported taxes. I was just trying to help the OP with a simplified suggestion that still meets FAFSA standards.
Anyway, on to the rest of the day, have a good one.
What are the SE exemptions?
Individuals who provide baby-sitting and lawn-mowing services are viewed by the IRS as household employees. In these cases, a household employee who is younger than 18 at any time during the tax year the work was performed is not subject to Social Security and Medicare taxes.
I’m skeptical. The closest IRS reference I could find says that “Payments for the services of a child under age 18 who works for his or her parent in a trade or business are not subject to social security and Medicare taxes if the trade or business is a sole proprietorship or a partnership in which each partner is a parent of the child.”
Thanks @skipig and @BelknapPoint for the discussion of SE exemptions. Looks from something I read on the Intuit (TurboTax) guidance site that some tax laws relevant to this discussion changed in 2014.