As the end of the school year approaches, if you are a parent of teenaged workers you may be asked by your child for advice about how to complete tax documents for a summer job. Her employer will ask her for:
1) Form W-4, Employee’s Withholding Allowance Certificate
2) Form VA-4, Employee’s Virginia Income Tax Withholding Exemption Certificate
3) Form I-9, Employment Eligibility Verification
4) In the case of workers aged 14 or 15, a work permit.
The first two forms are for the employer to use in withholding income taxes on the wages earned. The third form documents that your child is authorized to work in the United States. The fourth form requires written parental consent for an underage child to work. All of these forms should be returned to the employer by the first day of work. This is a great learning opportunity for your child as an employee new to the workforce, so let her read the instructions and familiarize herself with the procedures and requirements. Be available for help if she should ask for assistance as she goes through the process. This is an excellent opportunity to discuss the significance of income taxes to individual taxpayers and to the government, and what is involved in succeeding as an employee. You might consider asking her if you could review the forms for completeness and accuracy before she gives the forms to her employer. Your review may reveal some items that she might not know or understand about the forms, especially if you have been filing tax returns for her for investment income. Your advice to her could avoid a returned form with a consequent delay in hiring, availability for work, and receiving pay for her work.
The following apply in general to teenaged workers with a summer job, but be sure that you and your child read the instructions carefully to know if you have an exception to the typical situation. In that case, enter the appropriate information on the forms. In all cases, your child, as the employee, must sign and date the forms for validation.
For Form W-4, if she will make less than $5,450 a year from employment and has less than $900 in investment income for the year, she may be exempt from paying income taxes. However, note that she cannot be exempt if she can be claimed as a dependent on your (or another’s) tax return and her income exceeds $950 and includes more than $300 of unearned income (for example, interest and dividends.) If your child qualifies for exemption from federal income tax by meeting the requirements of: 1) no tax liability in the prior year, and 2) expectation of no tax liability in the current year, she should complete boxes 1, 2 3, 4, and write “Exempt” in box 7. If your child does not qualify for exemption from federal income tax, use the “Personal Allowances Worksheet” to determine the number to use in box 5. Remember that your child does not take an allowance on Line A if they are treated as a dependent on your (or another’s) income tax return. Should your child wish to have additional income tax withheld from each paycheck, to cover unearned taxable income or self-employment tax, for example, enter this amount in box 6.
Explain to your child that even though she may be exempt from federal income taxes, she will still have Social Security and Medicare deducted from her pay. These funds will be credited to her account and she will begin to have a work history.
For the VA-4, there is the opportunity to be exempt from Virginia income tax under similar circumstances to the federal W-4. In general, your child can claim exemption by checking the box on line 3 for either of the following conditions: 1) no income tax liability for the previous year and no income tax liability expected for the current year, or 2) Virginia adjusted gross income expected to be less than $11,950 for the current year. Again, there are other special circumstances and conditions for Virginia individual income tax liability, so be sure to review the instructions to Virginia Form 760 with your child to see if any of these apply. If exemption does not apply, complete the Personal Exemption Worksheet on the VA-4 and enter the result on line 1. Your child can request that additional income tax be withheld from her pay if the employer agrees; enter this amount on line 2.
For Form I-9, your child enters identifying information in the first part of Section I, checks a box for employment eligibility (generally, as a citizen of the US), and signs a statement indicating awareness of the consequences of false statements or false documentation. Your child must provide identification to establish identity and employment authorization. This is generally either: 1) a passport, or 2) a school ID or driver’s license and a social security card or birth certificate. Other forms of identification may be used; check the list of acceptable documents in the instructions.
And finally, in general, if your child is at least 14 but not yet 16, she must apply for a work permit as a minor. The necessary forms can generally be obtained through your child’s high school. A parent or guardian of your child must sign a “Permission for Employment” form in the presence of the person issuing the permit. Note that there special work restrictions are placed on employers in regard to minor employees.
At the beginning of next year, when your child receives her 2012 Form W-2 Wage and Tax Statement to report her earnings, discuss with her the process of filing income tax returns. Even if she is not required to file because her total taxable income falls beneath the income filing requirements, she will probably wish to file for a refund if she had any federal or state income tax withheld. With all of this practice and guidance, your child will be well on her way to understanding the requirements and responsibilities of being an employee and a responsible income taxpayer. Job well done!
Links to forms and instructions:
http://www.irs.gov/pub/irs-pdf/fw4.pdf
http://www.uscis.gov/files/form/i-9.pdf
http://www.tax.virginia.gov/taxforms/Business/Withholding%20Tax/VA-%204.pdf
http://www.doli.virginia.gov/laborlaw/laborlaw_childworkpermits1.html
-Nancy B. Corley, EA