Kids with summer jobs
Most young people with summer jobs can hold onto more of their earnings. They can escape having federal income tax withheld from their paychecks, as long as they didn’t owe any tax last year and do not expect to owe any this year. They’ll need to file a new W-4 form claiming exemption from withholding; the W-4 they signed last summer has expired.
The rule: If unearned income (dividends and the like) totals $350 or less and total income won’t be more than $6,100, they won’t owe tax. But if investment income is higher than $350, total income cannot be more than $1,000.
But here’s a saving idea: that young person can open a Roth IRA with his earnings to grow untaxed for many, many years. Granted that few youngsters are prepared to stash all their earnings away until they grow up and need the money—but their grandparents can open a Roth for them in the child’s name.
For nearly 30 years, Mike Nickerson has owned and managed a small, full-service accounting practice in the Midcoast. He holds a bachelor's degree in accounting from University of Southern Main and a master's degree in financial planning from Bentley University.
He is a past board member and president of the Maine Society of Certified Public Accountants and currently serves on the Maine Board of Accountancy.
An aged rock musician, Nickerson now finds musical enjoyment playing upright and electric bass in a variety of bands spanning folk to jazz music genres. He and his wife have three grown children, and they enjoy their free time hiking, kayaking, golfing, bicycling and motorcycling.
