If your child is going to work part-time (as a W2 employee) — while still your dependent for the entire year — there are some things you should do:
1. Completing Form W4
When your child is hired, they will need to complete form W4 to determine their federal withholding.
All too often, a child’s return is filed only to be refunded for all of the federal taxes withheld. Not only did your child go without access to those monies, but now you, the parent, are having to pay for the tax preparation to get back monies that did not need to be withheld.
The form W4 (2018) does allow one to claim to be “exempt” from withholding for 2018 if the following conditions are met:
All federal withholding for 2017 was refunded because the tax liability was $0.Unearned income (interest income, dividends, capital gains, etc) will be $350 or less for 2018.Earned income (wages) will be $12,000 or less.
2. State Withholding
States with income taxes, such as Ohio, have a withholding form that also needs to be completed. For Ohio, this is form IT-4. Unlike the federal Form W4, there is no ability to claim to be “exempt” from withholding for 2018.
Important Note for Out-of-State Students: If your child is a student at an out-of-state school and works in that state, not only do you have that state’s return to file to claim a refund of state tax, but there may also be an Ohio tax return (resident state) to be filed.
3. Local Withholding
Local tax is typically a fixed percentage of the local wages (e.g., Columbus, Ohio is 2.5%). Therefore, most times the tax filing does not result in a refund unless there was an error.
However, most localities will exempt local tax for wages earned by those under the age of 18. If your child is under age 18 while working, they should make sure their employer is made aware of the exemption from withholding.
Like the state, the city of residence considers the away-from-home student to still be a resident of their city until they are no longer a dependent. Therefore, if your child is 18 years of age or older and works out of state with no city withholding, the resident city will consider that income as taxable.
If you have questions or need assistance, please contact me today!
Susan A. Moussi, CPA, CFP®, CDFA SMD Tax & Divorce Financial Planning Consultants, Inc. Phone: 614.429.4172 firstname.lastname@example.org