NEW YORK (MainStreet) — Often the cost of preparing a short-form tax return for a dependent child with a summer job – solely for the purpose of getting a refund on the income tax withheld – is more than the amount of the refund.
Before starting a job your child will be given a W-4 to fill out. Line 7 of the W-4 allows an employee to claim exemption from federal and state income tax withholding, if he or she had no income tax liability for 2010 and does not anticipate earning enough to pay income tax for 2011, by writing the word “EXEMPT” in the box indicated.
Writing “EXEMPT” on the form means that the employer will withhold only FICA tax (Social Security and Medicare) and any required state unemployment or disability fund contributions from the dependent child’s wages. There will be no federal or state income tax withheld.
For 2011, the federal standard deduction for a dependent with a W-2 is the greater of $950 or the sum of $300 and the dependent's earned income, not to exceed $5,800. The state amount may be more of less than that.If a dependent child with a summer job does not expect to earn more than $5,800 during 2011, including up to $300 in interest, dividends and capital gains, the child should claim “EXEMPT” on the W-4 when he or she starts the job.
That way he or she will not have to file a federal income tax return simply to get a refund of the income tax withheld, because none will have been withheld in the first place.