Time to Cut the Cord
Get Your Kid Ready to Do Their Own Taxes…
The teenage years are filled with fun and responsibility. It’s about first dates, the first time behind the wheel, and first jobs. However, all of these “firsts” are accompanied by one thing–money. That is why it is important for teens to learn how to save money, use credit wisely, and pay dues to Uncle Sam.
Teaching your teenager about money is just smart parenting. Introducing them to easy tools they can use to independently manage their money is great for them and for parents who want to empower their kids and prepare them to be good money managers later in life.
So, if you’re still preparing your child’s tax return, it may be time to cut the cord, so to speak, and teach junior how to do his own taxes. But where to start? Open a dialogue. The first important step to educate teenagers on how to prepare and file their taxes is to talk about money and taxes well before they’re ready to file. Strangely enough, as parents communicating with our children, money is often the last taboo. We might talk to our kids about sex, but somehow we fail to talk about money and taxes.
If your teen receives W-2s, 1099s, or other statements of income from a summer job or a savings account, he or she might have to file. Even if filing is not required, it usually is a good idea to do so if wages have been withheld because your teen may be due a tax refund.
Your teen needs to know that after landing a job, she will be required to fill out a W-4 form at work. Help her understand that taxes are taken out of each paycheck throughout the year and that at the end of the year, she’ll receive a W-2 form that tallies all of the wages, including tips she earned.
When you sit down and prepare your child’s taxes, involve them in the entire process. The earlier you introduce the concepts, the better prepared your kids will be when they hit the working world and have to handle tax planning and preparation on their own.
One of the great things is that today, using a computer to do taxes will be right up your teen’s alley. Tax software like TurboTax will guide them through their return and ask simple questions without the tax jargon. It will also help them find and understand deductions. Although their income may be low and itemized deductions not an issue, explaining to them ways they can save on taxes will help them later in life and allow them to prepare their returns as a more informed adult.
Finally, put a stake in the ground and mark your year of transition. Don’t practice the “sink or swim” approach when it comes to educating your teen on tax preparation. Mark a year of transition to get your child ready, let them know they will be responsible for next year’s return. This allows them time to learn valuable tax information while building their confidence that they can do it themselves.