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Subject:  Re: Children with wages Date:  3/16/2013  5:54 PM
Author:  TMFPMarti Number:  118070 of 127617

From the IRS site, it states that 1040EZ may be used as long as taxable income is less than $100,000.

But there is also a line that tips must be included in boxes 5 and 7 of Form W-2.

Looking over their W-2's I see nothing indicating if Tips are or are not included. There is however a Box 8 for "Allocated tips", but that is blank in all cases.

You're making this too hard. If Box 7 has a number other than zero, tips are included on the W-2. If the worker reported all tips to the employer you can use the EZ. If the worker received tips not shown on the W-2 you may not use the EZ.

One of their jobs is working in a restaurant, but as I understand it Tips are shared among the staff and they don't personally pocket them.

Who does pocket them? Your statement makes no sense. Pooled or not, does tip money wind up in the worker's pocket at the end of the day? If so, it's income to the worker. If the worker receives more than $20 in tips in a month the worker is required to report them to the employer, who is required to include them in boxes 1, 5 and 7 on the W-2. If the worker received tips that weren't reported to the employer they are reported on Form 4137 attached to the 1040.

So, still thinking that 1040EZ is appropriate for children in most situations and that an employer that fills in line 8 would be doing a dis-service to their workers.

How is the employer doing a disservice to the employees by following the law, which requires entries in Box 8 in certain circumstances. Box 8 came about because there was rampant cheating among tipped employees and their employers. The kind it appears may be going on at this restaurant. In fairness to the employer, the tip rules are complicated, and some employers fail to comply because they don't understand.

This is a teaching moment for you with respect to your child. The lesson: do the right thing even when it's inconvenient to do so.

BTW, it appears that you children qualify for exemption from income tax withholding. By noting that on their W-4's they can avoid having to file just to get a refund.

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