What every student should know about summer jobs and taxes
Do you have a summer job during your time off from school? Do you know that you have to pay tax on themoney you’re earning from that job? Here are a few tips about earning money and paying taxes.
• Be sure you fill out Form W-4, Employee’s Withholding Allowance Certificate. Your boss uses this form to determine the amount of tax to withhold from your paycheck. If you have more than one job, you should
make sure all your employers are withholding enough taxes to cover your total income tax liability. To
ensure your withholding is correct, visit the IRS Withholding Calculator on IRS.gov.
• When determining how much income to report, include all the money you earned while working. This
usually means wages, salaries and tips.
• In some jobs, like waiting tables, you may receive tips from customers. Tips are considered income, just like your hourly wages. Therefore, you must pay tax on them. This includes tips customers give you directly, tips customers charge on credit cards and your share of the tips you split with your co-workers. For more
information about reporting your tips, read Publication 531, Reporting Tip Income.
• Are you doing odd jobs like babysitting and lawn mowing? These jobs are considered self-employment, and the money you earn is taxable. It’s important to know whether you are considered self-employed or a wageearner. You can get more information about this on the IRS website.
• If you have net income* of $400 or more from self-employment, you will have to pay self-employment tax.
This pays for your Social Security and Medicare benefits, which are normally paid for by withholding from
wages. The self-employment tax is figured on Form 1040, Schedule SE. *Net income is the money you
earned after any deductions — such as business expenses — have been subtracted.
• Generally, newspaper carriers or distributors under age 18 are not subject to self-employment tax. See the
special rules that apply to services you perform as a newspaper carrier or distributor if you are considered a
direct seller and should be treated as self-employed for federal tax purposes.
• If you are 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.
Now that you’re working this summer, you may be wondering whether you’ll have to file a tax return. The
answer depends on a number of factors from how much you’re making to whether or not your parents claim you as their dependent. You can read the rules and dollar thresholds in Publication 501, Exemptions, Standard Deduction and Filing Information, or use the IRS interactive tool to find out.
To learn more about taxes, including how you might qualify for a tax credit to pay for college or other qualifying education, visit Tax Information for Students on IRS.gov.
_________________________________________________________________________________
Resources
• Understanding Taxes – The Hows of Taxes shows you how to apply tax principles, while the Whys of Taxes explains tax history and theory.
Courtesy of IRS Outreach Corner
Courtesy of IRS Outreach Corner
No comments:
Post a Comment