Continuing Minds

With many teenagers starting summer jobs in a few weeks, it’s important that have a basic understanding of how the tax code works.

Uncle Sam will consider the majority of earnings made over the summer as taxable income, including bonuses and commissions. For those with a job waiting tables or other employment that includes tips from customers, those tips are also taxable income. Workers making more than $20 per month in tips, must report the amount to the employer so the taxes can be calculated and withheld. Tips either come in cash or added to the charge slip, workers and employers need to make sure both types are being recorded and calculated.

According to the IRS, teenagers making money from self-employment such as mowing lawns, designing websites, or babysitting, must pay tax on those monies and will be required to file a tax return if the earnings exceed $400. It’ not likely teenagers in this position will owe any income tax, but they will be required to pay self-employment tax, which funds Social Security and Medicare accounts.

Self-employment tax is computed at 15.3% of the profit, and kids can deduct any business expenses from the profit before paying the self-employment tax, so they should learn what expenses qualify as deductions. The IRS states that all “ordinary and necessary” business expenses can be deducted. Here are a few examples to help make determinations:

1. You babysitting for a family and you decide to take the kids to an amusement park at your expense. The amount you pay for admission, refreshments and other costs for the kids that aren’t reimbursed by their parents can be deducted as well as mileage if you drove them to and from in your own car.
2. You mow lawns and garden for your neighbor and at the end of the summer, you buy him an azalea bush as a gift. This is a valid business expense.
3. You design websites and needed to buy a laptop and special software. You may be able to deduct only a portion of the laptop if you did not use it 100% for business and you can write off the full cost of the software.

There may be a few employers who will want to hire summer workers as independent contractors, which means they will be considered self-employed and no taxes will be withheld from pay and at the end of the year workers will receive a Form 1099 rather than a W2.

The independent contractor label may not be appropriate for summer workers. The label might make it more expensive to the summer employees because they are not only paying their share of the taxes, but also paying what the employer would normally be responsible to cover.

For example, it would be appropriate for a teenager designing a website for the local ice cream store to be labeled an independent contractor, but for someone working for a company offering the same services it provides to their customers – like being a counter person at the ice cream store- then the IRS requires getting paid as an employee. The employer is required to pay into Social Security and Medicare accounts at a rate of 7.65% of the wages. For a teenager who really wants the job, but the employer refuses to put him or her on payroll, negotiate a higher pay rate to compensate for the additional taxes.

There are very few exceptions to earning income that would be considered nontaxable. One example is if someone is in the ROTC and participated in advanced training, the subsistence allowance you received is not taxable. However, active duty pay, such as pay received during summer advanced camp, is taxable.

For more information on taxable versus nontaxable income, check out IRS Publication 525 Taxable and Nontaxable Income. Students should browse Tax Information for Students and Publication 501 to determine whether a tax return needs to be filed.

Bonnie Lee is an Enrolled Agent admitted to practice and representing taxpayers in all fifty states at all levels within the Internal Revenue Service. She is the owner of Taxpertise in Sonoma, CA and the author of Entrepreneur Press book, “Taxpertise, The Complete Book of Dirty Little Secrets and Hidden Deductions for Small Business that the IRS Doesnt Want You to Know.” Follow Bonnie Lee on Twitter at BLTaxpertise and at Facebook.

In the constantly changing technological landscape, TV companies have to decide how easily they want to make it for viewers to watch their shows. Do they stick with the traditional model of premiering shows on networks and later repackaging them on DVD and online? Or do they try to make the shows as widely available as possible even if it risks fewer people watching the shows on TV … where the advertisers are.

At Forbes’ Power Redefined Women’s Summit on Thursday, Disney Media Networks Co-Chair Anne Sweeney spoke about the fact that Disney now streams its live content on tablets and mobile phones through the Disney WATCH app which lets kids watch shows like Doc McStuffins and Phineas and Ferb online with an authenticated connection.

“We believe media is becoming more personal because you can hold it in your hand,” said Sweeney who was speaking on a panel about the new dynamics of connectivity along with Gayle King, Google Google’s Susan Wojcicki and The Muse co-founder Kathryn Minshew.

Sweeney recalled when the company was testing the WATCH app and she saw two little children curled up together on the couch watching Disney even though there was a big TV in the room. She realized that kids liked the intimacy of watching their shows in such a cozy way.

Disney is embracing the changing relationship with its customers by making the company’s content as accessible as possible. (Although not every cable company has yet signed on to WATCH.) It’s not hurting the company’s bottom line. For the first six months of the year Disney reported $10 billion in revenue from the company’s media networks, up from $9.4 billion for the same time period last year.

Sweeney and her fellow panelists also talked about how technology is helping, or hurting, our ability to connect. King, who admits she struggles with technology, said that she prefers face to face interaction but she appreciates the fact that Skype lets her talk to her son who is living in Asia.

Wojcicki pointed out that the Internet helps people who are dealing with illnesses or other problems connect with similar people all around the world and gain the power of a supportive community. They all agreed that we’re only going to get more connected through technology but the challenge is going to be getting out of our little bubbles to find new things to like.

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If youve never heard of Toca Boca, then you must not have kids. The studio behind a series of popular childrens applications for iOS (iPhone and iPad) has just passed 22 million downloads across its portfolio of now 16 applications, and is today expanding to Android, starting with support for the Kindle Fire. More Android releases are planned for early next year, the company says.

Toca Boca, for those unfamiliar, operates like a startup within the family-owned, 200-year-old Swedish publishing company Bonnier. Founded in September 2010, Toca Boca CEO Björn Jeffery describes the companys structure as a startup with a very friendly bank: Its independently run, but doesnt have to worry about fundraising. Thats a different sort than many in the space. Often, kids app makers are either independent studios or are backed by VC funding.

Bonnier, says Jeffery, saw the potential for the iPad early on. It was another take on media, instead of repurposing old IP and old materials, he explains. A lot of media companies just take what they have and put them on a new screen, and say right, were finished. Toca Boca, however, grew out of earlier research in Bonniers Ramp;D division, where the company had developed concepts for how its media content could work on a digital, touchscreen computer. This research, in fact, was performed before the iPad was even released.

After the iPads launch, Jeffery says they realized some of their earlier ideas were right, and others were a bit off. But what stuck out the most was the way the iPad was being brought into family homes and shared. We thought it would be very interesting to see how we could make a shared experience on the touchscreen for children, says Jeffery. The touchscreen itself gives kids the possibility to have their first interactive media experience.

Toca Bocas debut app, launched in March 2011, was Toca Tea Party, which mixed digital and real-life play. (The iPad served as the host for a virtual tea party.) Subsequent releases have evolved that original concept of interactivity, but generally now have the child interacting with the characters in the app instead. The most popular series within Toca Bocas portfolio, Toca Hair Salon, allows kids to wash, cut, color and style various characters hair, for example. So far, this series alone has produced over 10 million of the 22 million total Toca Boca app downloads. These are digital toys, says Jeffery, not digital games. The company had just 5 million downloads this time last year.

Today, the company is trying to spin off that success with the release of a sequel, Hair Salon 2.  Although its early, the potential is there for another hit. The app is now No. 1 on iPad in 18 markets, and top 10 in 55 markets. Thats in paid apps overall, mind you, not kids apps. In the US, Toca Bocas largest market, its currently sitting in the No. 3 spot. Toca Bocas apps are available in 146 countries worldwide and range in price from 99 cents to $2.99. A few are free. The company previously announced it was profitable, but it doesnt discuss revenues.

As for whats next, the plan is to continue careful expansion into the Android market in 2013. Jeffery says that they have to research what that market looks like for them. Because of the fragmentation, they want to make sure theyre supporting the majority of their target market, but need to make sure the experience is sufficiently good on all the hardware. Thats one reason Toca Boca started by launching on Hair Salon 2 on the Kindle Fire. The other is that the Fire tends to have a family-friendly ecosystem.

Expansion Through Acquisition

In addition, thanks to the success of Toca Boca, Bonnier itself is now looking to grow its own portfolio of kids app companies through acquisitions. To that end, Toca Boca this year established offices in San Francisco, putting it closer to the kids app startups that might see joining Bonnier as a better way to grow their own businesses.

Sweden is a nice place, laughs Jeffery. But its not the sort of place that people happen to be in. San Fransisco is more of a hub for these sorts of things. He thinks that next year, the kids app market will be undergoing changes that will greatly impact startups building in the kids app space, which will make joining Bonnier a better fit for some smaller startups especially those who want to grow a long-term business, not build a company to sell it in two or three years time.

The amount of money going in [the kids app market] is going to create a different market dynamic, and that is going to require a lot of smaller developers to think twice, says Jeffery. You have to have a sufficient amount of budget to even compete. That could be a hard time for a lot of smaller developers. Its going to be an interesting 2013.

Acquisition and partnership talks are now under way with a handful of kids app companies, Jeffery says. He expects no more than three acquisitions to be completed in the year ahead.

The tragedy at Sandy Hook Elementary School may mentally affect many children, especially those that may have recently been through a traumatic event.

Its such an … unspeakable event that any young people when they learn about this will be shocked, Dr. Victor Fornari, director of the division of child/adolescent psychiatry at North Shore-LIJ Health System in New Hyde Park, NY, told CBSNews.com.

On Dec. 14, 2012, a gunman shot and killed 26 people, including at least 20 children at Sandy Hook Elementary School in Newtown, Conn., about 60 miles northeast of New York City. An official told CBS News the gunman targeted his mothers classroom. The gunman was later found deceased in the school.

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The American Academy of Pediatrics (AAP) said in a statement that it strongly recommends that parents and schools use available resources to talk to children about the tragedy. They offer resources on their website and also suggested that parents can talk to the childs pediatrician for advice and support.

Chapel Hill, N.C.

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Fred R. Conrad/The New York Times

Joe Nocera

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