Tuesday, May 29, 2012


{The post has been updated to include the 2012 standard deduction numbers – rdf}

Often times the cost of preparing a short form for a dependent child with an after-school or summer job, solely for the purpose of getting a refund of the in-come tax withheld, is more than the amount of the refund.

Before starting a job, a student is given a Form W-4 to fill out. Line 7 of the W-4 allows an employee to claim exemption from federal and state income tax withholding, if he/she had no income tax liability for 2011 and does not anticipate earning enough to pay income tax for 2012, by writing the word “EXEMPT” in the box indicated.

Writing “EXEMPT” on the form means that the employer will withhold only FICA (Social Security and Medicare) and any required state unemployment and/or disability taxes from the student’s wages.

For 2012, the federal standard deduction for a dependent with a W-2 is the greater of $950 or the sum of $300 and the dependent's earned income, not to exceed $5,950 (plus $1,450 if age 65 or blind). The state amount varies, and may be more of less than $5,950.

If a dependent student with a summer job does not expect to earn more than $5,950 during 2012, including up to $300.00 in interest, dividends and capital gains, the child should claim “EXEMPT” on his/her Form W-4. This way he/she will not have to file a federal income tax return simply to get a refund of the income tax withheld.


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