With summer time in full swing, if you’re a student your parents probably told you it’s time to get a job! If it’s your first job, it gives you a chance to learn not only about working, but also about paying taxes.
Summer job tax tips:
- Withholding and estimated tax – Your employer withholds tax from your paychecks. If you are self-employed, you may have to pay estimated tax directly to the IRS on set dates during the year.
- New employees – When you get a new job, you will need to fill out a Form W-4. Employers use it to figure how much federal income tax to withhold from your pay. The IRS withholding calculator tool on IRS.gov can help you fill out the form. While it’s no fun to see your paycheck cut, it’s better now than owing taxes at the end of the year!
- Self-employment – Money you earn doing work for others is taxable. Some work you do may count as self-employment like babysitting or lawn care. Keep good records of your income and expenses related to your work. You may be able to deduct those costs from your income on your tax return. Deductions cut taxes!
- Tip income – Serving can be a lucrative job for students but don’t forget – all tip income is taxable. Keep a daily log to report them. You must report $20 or more in cash tips in any one month to your employer. You must report all of your yearly tips on your tax return.
- Payroll taxes – You may earn too little from your summer job to owe income tax but your employer will usually withhold social security and Medicare taxes from your pay. If you’re self-employed, you may have to pay them yourself. They count for your coverage under the social security system.
- ROTC pay – If you’re in ROTC, active duty pay, such as pay you get for summer camp, is taxable. A subsistence allowance you get while in advanced training is not taxable.
For any tax questions or to set up a FREE 30-minute consultation, call Tax Alternatives in Brentwood, TN at 615-742-1099.
Tax Alternatives is located at 105 Westpark Drive, Suite 440 Brentwood, TN 37027.