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Avoid Unnecessary Federal Tax Withholding for Students

During the summer months, many high school and college-aged students take on part-time jobs to earn some extra income. However, it's common for these young workers to have federal income taxes withheld from their wages, even if they are not required to pay taxes. This often leads to unnecessary tax burdens and the hassle of filing tax returns to reclaim withheld amounts.

federal tax withholding for working students

Fortunately, the IRS has provided a simple solution to help parents and their working children avoid this issue. By following a few steps, you can ensure that your child does not have federal income taxes withheld from their summer job wages. Let's explore the details and benefits of this process.


Understanding Tax Liability for Working Children

It is essential to be aware of the tax rules that apply to working children. In most cases, a child will not owe federal income taxes unless their earned wages exceed a certain threshold, which was $13,850 in 2023. Based on these criteria, many working children end up receiving a full refund of the federal income taxes withheld from their wages by filing a tax return the following year.


The IRS Solution

Claiming Exemption from Withholding

To simplify the process and avoid unnecessary tax withholding, the IRS offers an exemption for working children. By following these steps, parents can ensure their child does not have federal income taxes withheld from their wages

Complete Form W-4

The Form W-4 is typically filled out on the first day of employment. In Step 1(a) and 1(b), provide the child's personal information, including their name and Social Security number.

Write "Exempt" on Form W-4

In Step 4(c) of the Form W-4, instruct your child to write the word "Exempt." This certifies that they meet the conditions for exemption from federal income tax withholding.

Complete Step 5

Ensure your child completes Step 5 of the Form W-4, which includes their signature and date.

Skip Other Steps

Your child should not complete any other steps on the Form W-4. By only
providing the necessary information and claiming exemption, you can prevent unnecessary tax

State Tax Considerations

In addition to federal income tax, it's essential to check your state's tax regulations regarding withholding for working children. Visit your state's tax department website to determine if your child is also exempt from state income tax withholding. Following the state-specific guidelines will help your child avoid unnecessary state tax deductions as well.


Benefits of Claiming Exemption

By ensuring that no federal income taxes are withheld from your child's wages, you provide them with immediate access to their full earnings. This can help them manage their finances better and potentially rely less on parental financial support during that period. Moreover, by avoiding unnecessary tax filing requirements, you save time and money associated with preparing tax returns or seeking professional assistance.

Helping your working child avoid unnecessary tax withholding is a simple process that can benefit both of you. By having your child write "Exempt" on Line 4(c) of the Form W-4 and checking your state's tax regulations, you can ensure they have access to their full earnings without the burden of tax obligations. This small adjustment can save time, money, and headaches associated with unnecessary tax filing, allowing your child to enjoy their summer earnings to the fullest.

DISCLAIMER: The information provided herein does not constitute the provision of legal advice, tax advice, accounting services or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional legal, tax, accounting, or other professional advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation and for your particular state(s) of operation.