Will your dependent child be working this summer?
Before starting a job, employees are given W-4s to fill out. Line 7 of the W-4 allows the employees to claim exemption from federal and state income tax withholding if they had no income tax liability for 2009 and don't anticipate earning enough to pay income tax for 2010.
Writing “EXEMPT” on the form means that the employer will withhold only FICA (Social Security and Medicare) and any required state unemployment and/or disability taxes from the student’s wages. There will be no income tax withheld.
For 2010, the federal standard deduction for a dependent with a W-2 is the greater of two numbers: $950 or the the dependent's earned income plus $300, not to exceed $5,700 (plus $1,400 if age 65 or blind). The state amounts vary and may be more or less than $5,700.
Often, paying a tax pro to prepare a short form for a dependent child with a summer job, solely for the purpose of getting a refund of the income tax withheld, is more than the amount of the refund.
If a dependent student with a summer job does not expect to earn more than $5,700 during 2010, including up to $300 in interest, dividends and capital gains, the child should claim “EXEMPT” on his/her W-4.
New Jersey tax pro Robert D. Flach has been preparing 1040s for individuals since 1972.
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