My Daughter and her w2

[williamlsu]

My daughter received a w2 from her employer she is a waitress at an Asian restaurant, and they pay her a check each week looks like a personal check. She got a w2 for this year in the mail from this employer. Wages were around 4900 and federal taxes withheld were 5 dollars and 300 or so in social security. My question is what is going on here? Does she need to pay those federal taxes or is it only if she makes above 6500? I'm guessing the check they write her is the CC tips and her base wage. The cash she gets to keep. I'm thinking next year if she works there, she will likely make less that 16,500. So, does any of this matter and should I worry her about it?  Any help and education in this matter will be much appreciated.

Thanks,

William

[MindyB · Accepted solution]

No, the $5 on the W-2 is not something she needs to pay.  It is indicating that the restaurant remitted the $5 on her behalf.  She does not need to file a tax return, because dependents with income of less than $14,600, or unearned income (like from investments or trusts) of less than $1,300 are not required to do so. The cash tips are income that need to be considered. You can read more about that here: Are Tips Taxable?

Also, I don't know what state you reside in, but please check the instructions for your state's income tax return.  Some require filing with any amount of earned income.

Next year, she may have a filing requirement, depending on how much she actually makes. The filing requirement for 2025 is $15,000.

[Mike9241]

all employees are subject to medicare and social security taxes on their wages. the combined rate is 7.65% (6.2% social security 1.45% medicare). if there are only amounts in boxes 1-6 she would only need to file to get back the $5 in federal withholding assuming this is her only income. see below if your state has a personal income tax

for 2025 she can have compensation up to $15,000 equal to the standard deduction  ( no other income) and assuming full medicare and social security taxes are paid / withheld by her employer she would owe no federal taxes.

don't know what state you live in because some states have an income tax and different filing requirements.

[VolvoGirl]

If she doesn’t have a filing requirement she can still file to get a refund of the $5 withholding.  Do you claim her as a dependent?   How old is she and is she a full time student?   

Filing requirements for a dependent
https://ttlc.intuit.com/community/children-dependents/help/do-i-need-to-file-my-own-taxes-if-i-m-a-d...

If she is not a dependent.    Do you need to file a return?

https://ttlc.intuit.com/community/filing-and-paying-taxes/help/do-i-need-to-file-a-federal-return-th...

[Hal_Al · Accepted solution]

Q. My question is what is going on here? Does she need to pay those federal taxes or is it only if she makes above 6500? 

A.  All that is correct and absolutely normal.  FICA (social security and Medicare) tax is taken out at the very first dollar of income.  Although she will not have to pay any income tax if her wages, for the year, are under $14,600, it is not unusual for an employer to have withheld a little bit of federal income tax. She can get the $5 back (but not the "300 or so in social security") by filing a federal income tax return. She should qualify for the TurboTax free version. She is not required to file a federal return.*

*You do not report her income on your return. If it has to be reported, at all, it goes on her own return. A dependent  must file a tax return for 2024 if he had any of the following:

1. 1.  Total income (wages, salaries, taxable scholarship etc.) of more than $14,600 ($13,850 for2023).
2.  Unearned income (interest, dividends, capital gains, unemployment, taxable portion of 529 distribution) of more than $1300 ($1250 for 2023). 
3. Unearned income over $450 and gross income of more than $1300.
4.  Household employee income (e.g. baby sitting, lawn mowing) over $2600 ($14,600 if under age 18)
5.  Other self employment income over $432, including money on a form 1099-NEC

Even if he had less, he is allowed to file if he needs to get back income tax withholding. He cannot get back social security or Medicare tax withholding.

In TurboTax, he indicates that somebody else can claim him as a dependent, at the personal information section.

If your daughter can not be  dependent, then the filing requirement is $14,600 regardless of the source of the income. 

[Opus 17]

"I'm guessing the check they write her is the CC tips and her base wage. The cash she gets to keep."

This is tax avoidance.   Cash tips are taxable income. The IRS expects that tipped employees will report all their tips to their employer, even cash.  The employer is required to include that money in their box 1 taxable wages, and withhold income tax, social security and Medicare tax based on the total of her tips and base wage.   I'm not saying every tipped employee reports every bit of cash, but they are supposed to, and if she did not, there is a place on the tax return to include tips that were not reported to the employer so they can be taxed properly.

https://www.irs.gov/businesses/small-businesses-self-employed/tip-recordkeeping-and-reporting

Only about 1% of taxpayers are audited, but if she is audited, the IRS can look at her bank deposits and her lifestyle spending, calculate the amount of tips they think she has not disclosed, and assess tax, and then it is her burden of proof to prove that the IRS is wrong.  So I would suggest caution, and read some of the rules, so she starts her work life on the right foot.

[williamlsu]

thanks everyone for the quick replies they were all helpful.