NEW YORK (MainStreet)Will your teen-age son or daughter be working during summer vacation?
The 2013 federal standard deduction for a dependent child with a W-2 is the greater of $1,000 or the sum of $350 and the dependent's earned income, not to exceed $6,100. The state filing threshold amount may be more of less than $6,100.
Before starting work, your dependent will be given a Form W-4 to fill out. If your son or daughter does not expect to earn more than $6,100 during 2013, including up to $350 in interest, dividends and capital gains, have him or her claim "EXEMPT" on the W-4. This way he or she will not have to file a federal or state income tax return simply to get a refund of the income tax withheld.
Line 7 of the W-4 allows an employee to claim exemption from federal and state income tax withholding, if he/she had no income tax liability for 2012 and does not anticipate earning enough to pay income tax for 2013, by writing the word "EXEMPT" in the box indicated. 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.
If your state tax filing threshold is less than $6,100, you can usually file a separate state Form W-4 to have state income tax withheld.
You should consider opening up a Roth IRA account for your working dependent son or daughter.