Picking Up Seasonal Work: A Teen’s Guide to the Tax Implications

’Tis the season for teens to pick up a part-time seasonal job and earn a little spending cash for the holidays.” That might not have the same ring as some of our favorite holiday tunes, but it has something even better—cha-ching.

From entrepreneurial jobs around the neighborhood, like shoveling driveways or helping to put up decorations, to more traditional work at stores or restaurants that are hiring extra help during the holiday rush, there are plenty of ways to earn cash during the holiday season. But before you start dreaming up visions of sugarplums in your head, it’s important to know the tax implications you will encounter.

Here are the top three things teens should know about taxes when it comes to seasonal jobs:

1 – You get to “celebrate” a new holiday.

You know how adults are always groaning on about doing taxes? With your seasonal job you get to experience it all for yourself. Hooray! If you’re younger than 19 or a student who’s younger than 24, you’ll most likely have to file as a dependent. As such, a tax return is only necessary if your earned income is more than $6,300. However, even if you didn’t earn that much, it’s not a bad idea to file anyway. For instance, if your employer withheld income tax from your pay, you’ll need to file a return in order to recoup that money. (But if your employer withheld Social Security and Medicare taxes, it’s theirs to keep). The IRS won’t automatically repay your income taxes withheld, so if you don’t file a tax return to claim your income tax withheld, the IRS won’t automatically refund the tax. Easy decision.

2 – The system has your back.

Helping the old Henderson couple put up a Christmas tree or lending the Johnsons a hand by babysitting while they do holiday shopping is usually the type of work that we think of as being paid under the table. But the truth is if you earned any money doing side jobs, you’re technically an independent contractor doing work classified as self-employment. Although you won’t be subject to federal income taxes, you might have to pay self-employment taxes if you’re net earnings are $400 or more. On the bright side, you may also be able to deduct costs that are associated with the job. That gas you used to fuel your snow blower or the money it took to get to and from the babysitting gig can be subtracted from the total amount you earned. Reporting a smaller number will help lower your taxes. So be sure to keep good records of the money you spent—it’ll pay off in the end.

3 – You can’t spend all the money you earn.

Don’t let that discourage you. It simply means that a portion of your salary will be set aside for taxes. Welcome to adulthood! The why’s and how’s of this may not make sense to you at first, but it all makes sense once your bill is broken down. The important thing to remember is that all income, even the tips you’re earning as a waiter, is taxable. Not being completely forthcoming with the government isn’t typically good idea—we’ve all seen the movies. So always keep track of the money you’ve made, and don’t spend it all before you know how much you might owe in taxes.

Knowing and following these simple guidelines will guarantee that your hard-earned money doesn’t become a lump-of-coal problem for you down the road.

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