Tax season is upon us all, not just for us adults, but also for our children with part-time jobs. I was reminded of this fact when I opened the mailbox and found my son’s W-2. He wants to get his taxes done as soon as possible as he knows he will likely get a refund. I could just sit down and quickly pound out his taxes, but I want him to be involved in the process. There are several reasons kids should be involved in the process of filing their taxes.
Understand Amount of Taxes Paid
Teenagers typically looks only at the numbers on a paycheck that represent how much money they get. Not much time is spent looking at how much the government takes in taxes. This is a great opportunity for students with a part-time job to see just how much they had paid in taxes during the previous year.
Understand Types Of Taxes
While entering information into a tax form from the W-2, your child may notice there are several different types of taxes. This should start a conversation about the types of taxes such as FICA, Federal Income Tax, State Income Tax, and others.
Tax Bracket Education
As the child’s tax return completes, they will notice they are due a refund. This is a great time to introduce and explain the concept of tax brackets and to explain how people pay a higher percentage as their income increases. This is also a perfect opportunity to show them how to determine which 2022 tax brackets apply to them. They get most or all of their income tax returned because they fall into a low-income tax bracket.
Tax Preparation Baby Steps
Kids with a part-time job typically have only that one W-2, and they only have to fill out the short 1040-EZ form. Being part of filing their taxes introduces them to the concepts and processes. As they get older, their taxes will get more complicated and having some experience now will help them immensely later.
Kids with a part-time job think of tax time as when they get a chunk of money back in the form of a tax refund. But it’s also an opportunity for parents to teach them invaluable financial lessons as to how taxes work, and to learn how to file their own tax return.
How about you, EOD Nation, do you involve your kids in filing their tax return? Or, did your parents involve you in filing your tax return?