The Ultimate Tax Guide for 12th Grade Students
Entering the adult financial world is confusing. Here is exactly how we navigate the IRS for you, no matter how you made your money this year.
Entering the 12th grade is a massive transition. You are preparing for college or entering the workforce, you likely have your first real job, and you might even be dabbling in investing, crypto, or content creation. With financial independence comes the IRS. Unfortunately, high schools rarely teach you how to file taxes—let alone how to optimize them to keep more of your own money.
The tax code for teenagers and young adults is actually quite treacherous because your finances are still legally entangled with your parents' finances. If you do it wrong, you don't just mess up your own return; you mess up your whole family's return. At Yellow Business Services, our philosophy is simple: You shouldn't have to worry about this. We handle every complex scenario below automatically.
Scenario 1: The W-2 Employee (Retail, Fast Food, Lifeguarding)
If you filled out a W-4 form on your first day of work, and you notice that taxes are taken out of your paycheck every week, you are a W-2 employee. At the end of January, your boss will hand you a Form W-2 (or email it to you via a portal like ADP or Gusto).
Do you have to file? If you made less than the standard deduction for dependents (around $14,600 for the 2024/2025 tax year), you technically do not owe the federal government any income tax. However, you absolutely want us to file a return for you! Why? Because your employer has been sending a portion of your paycheck to the IRS all year long. The only way to get that money back in your pocket is to file a tax return to claim your refund. We make sure every penny withheld comes back to you.
Scenario 2: The Side-Hustler & Gig Worker (DoorDash, UberEats, Babysitting, Landscaping)
Welcome to the gig economy! If you are paid via Venmo, CashApp, Zelle, or receive a Form 1099-NEC from a company like DoorDash or Instacart, the IRS considers you to be a self-employed business owner.
This is where "free" tax software gets incredibly confusing, and where we step in to save the day. If your net earnings from side hustles are $400 or more, you are legally required by federal law to file a tax return. Because you are self-employed, you have to pay the "Self-Employment Tax" (a flat 15.3% for Social Security and Medicare), even if you don't owe standard income tax.
How we help: We don't just file your forms; we aggressively hunt for your business deductions. Did you drive your car to deliver food? We deduct the mileage. Did you buy a new lawnmower for your landscaping gig? We write it off. Did you use your cell phone to coordinate with babysitting clients? We deduct a portion of the bill. By maximizing your Schedule C business deductions, we drastically lower the amount of tax you owe—and we handle all the complex math for you.
Scenario 3: The Influencer & Content Creator (TikTok, YouTube, Twitch)
Are you monetizing your social media? If you are earning ad revenue from YouTube, getting paid through the TikTok Creator Fund, receiving Twitch subscriptions, or taking brand deals on Instagram, you are running a media business. You will likely receive a Form 1099-K from payment processors like PayPal or Stripe.
The IRS is actively cracking down on unreported influencer income. You cannot ignore this money. We handle the reporting of all your digital income. Furthermore, we write off your creator expenses: ring lights, cameras, editing software subscriptions (like Adobe Premiere), and even the internet bill. You create the content; we handle the compliance.
Scenario 4: The Robinhood Trader & Crypto Investor
It has never been easier for teenagers to buy stocks, ETFs, or cryptocurrency (often via custodial accounts or immediately upon turning 18). If you sold stocks or swapped crypto during the year, you have generated "capital gains."
The IRS treats investment income completely differently than money you earned from a job. This brings us to the infamous "Kiddie Tax." The Kiddie Tax was created by Congress to prevent wealthy parents from hiding investments in their children's names to avoid taxes. If a dependent student has more than $2,500 (as of recent tax years) in unearned income (investments, interest, crypto gains), that income may be taxed at their parents' much higher tax bracket, rather than the student's lower tax bracket.
If you traded crypto or stocks, the exchanges (like Coinbase or Robinhood) report your sales directly to the IRS. You must file a Schedule D. Don't try to calculate this yourself. We integrate with your brokerage, import your 1099-B tax documents, calculate your capital gains and losses, and navigate the Kiddie Tax rules to keep you perfectly legal.
Preparing for College: FAFSA and Scholarships
As a 12th grader, you are likely applying for college and filling out the Free Application for Federal Student Aid (FAFSA). The FAFSA requires tax information from two years prior (known as the "prior-prior year"). By having a clean, professionally prepared, accurate tax history now, you make future FAFSA applications and financial aid verification infinitely easier.
What happens if you win a scholarship right out of high school? We want you to be prepared: Not all scholarships are tax-free.
- Tax-Free Scholarships: Money used strictly for tuition, mandatory school fees, and required textbooks.
- Taxable Scholarships: Money used for room and board (dorms), meal plans, travel, or living expenses. If your scholarship covers your dorm room, the IRS requires you to claim that amount as taxable income on your return. We help you split these numbers correctly so you only pay what is absolutely legally required.
At Yellow Business Services, our promise is that you don't have to become a tax expert. You just hand us your documents, tell us what you did this year, and we construct a bulletproof tax return on your behalf.