Summer Jobs and Taxes: Helping Teens Navigate IRS Rules

Welcome to the Tax Summer Series

Sun, fun… and tax implications?

Each summer brings more than sunshine and lemonade—it brings real-life events that carry real tax consequences. Whether your clients are sending teens to their first job, renting out the lake house, planning a wedding, or booking a week at camp, they’ll look to you for guidance.

In this Tax Summer Series, we’re unpacking common warm-weather scenarios that spark tax questions, from child labor rules to vacation home deductions—and everything in between. Join us this summer as we spotlight timely topics to keep you sharp and ready for whatever summer throws your way.

Tax Summer Series #1:
Summer Jobs & Taxes: Helping Teens Navigate IRS Rules

Summertime is near, which means teens will start jobs, which is the initiation into adulthood. These jobs offer a sense of independence along with a wonderful way to earn their own money. However, with great earnings come significant responsibilities, specifically tax responsibilities. It is your job as a tax practitioner to help teens and their parents navigate the tax laws and the impact of summer employment. Here are some helpful tips and IRS laws for teens with summer jobs and internships.

Understanding IRS Rules for Teens with Summer Jobs

The IRS has specific guidelines for teenagers working summer jobs and internships. Here are some key points to keep in mind:

• Age Requirements and Types of Jobs: Teenagers can work in many roles, from mowing grass, flipping burgers and bagging groceries. The type of job and the pay earned can affect their tax requirements. For instance, a teen working at a fast-food restaurant would have taxes withheld from their paychecks, while a teen mowing grass would need to track their income and expenses as they would be liable for self-employment tax if it exceeds the threshold. Knowing the differences beforehand is key to reporting the tax correctly.
• Income Thresholds for Filing Taxes: Teens are required to file a tax return once their income exceeds certain thresholds. For example, if they earn more than $15,000 in 2025, they must file. The threshold includes all sources of income, including wages, salaries, and tips. Often, it is a good idea to file a return even if their income does not exceed the threshold if they are entitled to claim a refund on taxes withheld from their paychecks.

Tax Implications for Teenagers

Summer jobs often have tax implications and understanding these can help teenagers avoid surprises when filing taxes.

Income Tax: Income tax applies to all earnings, including wages, salaries, and tips. Teenagers should report all income, including part-time or temporary jobs. This income includes cash payments and non-cash tips. Failure to report all income can cause tax penalties and interest.

Withholding and W-4 Forms: Accurately filling out Form W-4 is essential to determining what needs to be withheld from the teen’s paycheck. Teenagers should use the IRS Withholding Calculator to ensure accurate withholding. Proper withholding of taxes from each paycheck helps avoid owing taxes at the end of the year and provides the correct taxes that are withheld from each paycheck.

Self-Employment Tax: Teenagers who earn money from self-employment, such as babysitting or lawn mowing, must pay self-employment tax if their net income exceeds $400. This tax covers Social Security and Medicare benefits. Self-employed teens should keep detailed records of income expenses and net income to determine their tax liability.

Income Thresholds for Filing

Understanding the income thresholds for filing taxes is essential for teens with summer jobs and their parents. Here is a detailed look at the requirements.

Earned Income: For 2025, a single dependent under 65 must file a tax return if their earned income exceeds $15,000. This includes wages, salaries, and tips from part-time or temporary jobs.

Unearned Income: If a teen has unearned income, such as interest or dividends, exceeding $1,350 for 2025, they would be required to file a tax return. Unearned income is typically reported on a 1099-INT or 1099-DIV.

Internships for Teens and College Students

Internships provide valuable experience and networking opportunities, but they can also come with tax implications:

• Taxable Internships Compensation: Internship compensation, whether it is in the form of wages, salaries, or stipends, is considered taxable income. This would include monetary compensation, which is subject to federal, state, and sometimes local taxes.
• Withholding requirements: For interns that are classified as employees, employers are required to withhold federal income, state, Social Security, and Medicare taxes. The amount withheld depends on the information provided on the intern’s form W-4.
• Independent Contractors: Interns classified as independent contractors receive a Form 1099-NEC and are responsible for self-employment taxes, which combine the employee and employee portions of Social Security and Medicare taxes.
• Non-Monetary Compensation: Non-monetary compensation, such as allowances for housing transportation, is also taxable. Interns must report the fair market value of these benefits as income.

Tips for Tax Practitioners to Help Teenagers

As tax practitioners, you can play a vital role in educating teenagers and their parents about tax responsibilities.

Educational Strategies

• Explain Tax Concepts: Use simple language and relatable examples to explain tax concepts to teenagers. For instance, paying taxes can be compared to contributing to a community fund that supports public services like schools and roads.
• Provide Resources: Share IRS publications and tools, such as the IRS Withholding Calculator and Pub 531 which are both offer valuable information that will help educate teens and their parents understand their tax obligations.

Practical Advice

• Checklist for Starting Summer Jobs: We have created a checklist that you can download for teens to follow when starting a summer job. This checklist includes filling out Form W-4 and keeping track of tips. It can be a handy reference and ensure teens know their tax responsibilities.
• Common Tax Forms: Educate teenagers about common tax forms they might encounter, such as Form 1040 and Schedule SE. Understanding these forms can help teens accurately report income and deductions or credits they may be entitled to when filing.

Preventative Measures

• Avoid Common Tax Mistakes: Tips to help teenagers avoid common tax issues, such as underreporting income or failing to file, may be beneficial. It is essential to keep accurate records and report all income, including cash payments and tips.
• Managing Unexpected Tax Situations: It is good to know that your practitioner may be able to help you manage unexpected situations, such as receiving a large tip or making more income than initially expected. Encourage them to contact their tax practitioner if they have an unforeseen circumstance.

Conclusion

By educating teens about their tax obligations, we can help them develop good financial habits at an early age to help them through their lives. Those helpful tips, guidance, and resources will help them navigate their future.

By Jill Kenady, Tax Materials Specialist
U of I Tax School

Sources

• Tax Information for Students:  https://www.irs.gov/individuals/students
• What every student should know about summer jobs and Taxes: https://www.irs.gov/pub/irs-utl/OC-Whateverystudentshouldknowaboutsummerjobsandtaxes.pdf