Q. My daughter has a part-time job at college and she’s being paid under the table. I know any income could hurt her for financial aid but I don’t feel right about it. What should she do?
A. Paying income taxes can be a shock for young people who get their first job, and they’re often happy when an employer is willing to pay them on the side.
But your instincts are correct. it’s illegal.
And, your daughter’s income may not be as significant as you think in terms of financial aid and income tax.
Your daughter should report the income for both income tax purposes and financial aid purposes, said Howard Hook, a certified financial planner and certified public accountant with EKS Associates in Princeton.
Hook said for purposes of calculating financial aid, the income will be counted.
“Fifty percent of a student’s income counts when determining the amount that the student can contribute to paying for college,” he said. “However, the first $6,660 of student income is not counted when calculating the 50 percent of income number.”
So if she is only earns $6,660, then there is no penalty at all, he said.
From an income tax perspective, Hook said, the first $12,000 of earned income for a child who is a dependent of their parents is not subject to income tax.
“So depending upon the part-time income, the amount of tax is likely minimal,” he said.
Email your questions to moc.p1548026007leHye1548026007noMJN1548026007@ksA1548026007.