What Teen Business Owners Need to Know About Taxes
Teenagers and young adults frequently launch their own businesses after schooling or over the holiday season. Temporary or part-time jobs can fall under this category. When teenagers or young adults work for a company, their employer taxes them from their pay itself. Make sure to get help from a CPA in Savannah. They are responsible for paying their tax responsibilities regardless of whether they are considered freelancers or one’s own bosses.
Six items to remember are listed below:
- Everyone, including children who had a net self-employment income of at least $400, was required to file a tax return.
- Even if their parents or guardian classifies them as dependent, teenagers and young adults should file their own tax returns if they owe taxes.
- Young adults and teenagers can complete and sign their own tax returns. The age requirement to sign a tax return is undefined.
- Parents cannot claim a dependent’s earned income on their tax return.
- Self-employed individuals typically must pay self-employment tax in addition to income tax. This includes the portion of Social Security and Medicare taxes that employers pay in addition to the taxes often withheld from wage employees’ paychecks.
- Teenagers and young adults can reduce their tax liability by deducting specific expenses.
What aspiring business owners should do to stay on top of their tax obligations:
- Observe records. Throughout the year, creating and maintaining financial records and receipts is a good idea. Keeping records can help you keep track of your income and deductible costs and give you the data you need for your tax return.
- Pay any estimated tax due. Teenagers and young adults classified as dependents who anticipate having a 2023 tax liability of at least $1,000 are required to make anticipated quarterly payments. To avoid a fine, they should pay adequate tax on time.
Taxpayers can ask for their withholding to be increased to cover their estimated taxes on their self-employment income if they also have a job where their employer deducts taxes. They avoid having to pay estimated taxes individually in this manner. Wage earners can use the Tax Withholding Estimator on the IRS website to determine the appropriate amount to withhold.
- Send in a tax return. Young taxpayers can peruse the documents and forms, compile their records, and e-file their tax returns when the time comes. They should review their records, including any estimated taxes they may have already paid, before getting ready to file a tax return.
Through Online Accounts and IRS Direct Pay, every taxpayer who owes taxes can make an electronic payment.