Young adults always jokingly mention the fact that they would’ve appreciated learning about useful adult things like filing taxes instead of the many other difficult and technical things that they learned in school. To be fair, there are a lot of things that may not feel like they have practical applications in the real world so learning about something that will help them avoid a significant amount of stress later on would be preferable.
The thing is, however, school teaches kids the skills they need to handle their taxes later on. Many educators feel like it’s not necessary to teach kids how to get to know or fill up IRS forms if they have the skills needed to do those things. The act of preparing and filing taxes shouldn’t be that difficult if you’ve gotten down the basics and if you’re mindful of it all year long.
There’s also an argument that school prepares kids more for higher education and that practical stuff can be taught by parents at home. This is another good point to explore as some might see it as a flaw of the education system as not everyone will go on to pursue higher education while everyone will need to file their taxes in their adulthood.
No matter what the case is, though, it might be best to teach your kids about taxes on your own. This can be a bit of a challenge as the process itself can be tricky for adults and kids might not be very interested in such a tedious task. How do you do it, then? Here are the most basic things you should keep in mind.
Introduce your kids to the concept of taxes.
Getting your child acquainted with the concept of taxes is the first step in this entire process. They first need to know what taxes are if you’ll be able to teach them the more technical parts of it later on. Lots of parents use this as a good math exercise for their school-aged kids or as a way to teach them some financial literacy.
You can start by trying out the concept at home by pooling a tax jar from their allowance. You can then let them decide what to do with the money later on but it would be ideal to emphasize that it should be for the good of the entire family. This can be a nice way to replicate how taxes work in a society, allowing them to grasp the idea with greater ease.
Time the introduction before or around the time they start thinking about getting a part-time job.
Getting a part-time job is the first step towards adulthood for a lot of kids. This is also the best time to really teach them about taxes as they will need it. Even minors can get taxed if they’re already making some income so it’s best to start teaching them about the technicalities around this time.
Since most kids start getting part-time jobs during high school, you can already give them a run through of the different kinds of taxes they may be subjected to. They will most likely fall under annual income taxes as their earnings might only meet the minimum amount. These numbers tend to change, however, so you also need to discuss with them that staying on top of tax laws is important. If it exceeds the minimum deductions, they may need to file an income tax return like a regular adult with a regular job.
It’s also important to let them know that unofficial jobs are still going to be taxed. As long as they earn an income, they need to pay taxes. Even unearned income needs to be filed and paid for. So whether they’re making money from side hustles, investment interests, or other gimmicks that showcase their resourcefulness, you have to make sure that they learn about taxes as well.
Introducing your kids to the different forms they’ll encounter is also a good way to prepare them for their first tax season. This is one of the trickiest things for young people as filling out forms can be quite nerve-wracking. Mistakes on IRS forms can be extra scary as it might lead to serious consequences, so it’s best to walk them through the ones they’ll most likely encounter soon.
Have them keep an eye out for the Form W-4. This will be a great indicator of whether they’re truly employed or not. If they’re employed, their employers will include this form in the stack of documents that they’ll need to accomplish and submit.
Emphasize the kinds of information that they need to provide.
There are two crucial details that tax returns will need to have: the filer’s name and their tax identification number or TIN. However, for young individuals, their social security number will do as they might not have a designated TIN yet. Emphasize that these details need to match with the information the IRS has on their file so they shouldn’t use nicknames when filling up forms.
Introduce them to handy tools that can be used for tax filing.
Filing taxes can seem very overwhelming to young people so it would also help to lighten up the mood by introducing them to the tools they can use to simplify the process. Let them know about the services of FreeTaxUSA or TurboTax so they can know that they’ll be able to get help if they need it.