Many students take a job in the summer after school lets out. If you know such a student, please share this article with her. Or if you happen to be one of those students, you should read on and take heed.
If it’s your first job, it gives you a chance to learn about the working world. That includes taxes we pay to support our local, state and federal governments. Here are six things that students should know about summer job taxes:
- Don’t be surprised when your employer withholds taxes from your paychecks. That’s how you pay your taxes when you’re an employee. If you’re self-employed, you may have to pay estimated taxes directly to the IRS on certain dates during the year. This is how our pay-as-you-go tax system works.
- As a new employee, you’ll need to fill out a Form W-4, Employee’s Withholding Allowance Certificate. Your employer will use it to figure how much federal income tax to withhold from your pay. You can use the IRS Withholding Calculator tool on IRS.gov to help determine how to fill out the form. You will have to fill out a similar form for calculating the amount to withhold for state income tax in most states.
- Keep in mind that all tip income is taxable. If you get tips, you must keep a daily log so you can report them. You must report $20 or more in cash tips in any one month to your employer. And you must report all of your yearly tips on your tax return.
- Money you earn doing work for others is taxable. Some work you do may count as self-employment. This can include jobs like baby-sitting and lawn mowing. Keep good records of expenses related to your work. You may be able to deduct (subtract) those costs from your income on your tax return. A deduction may help lower your taxes.
- You may not earn enough from your summer job to owe income tax. But your employer usually must withhold Social Security and Medicare taxes from your pay. If you’re self-employed, you may have to pay them yourself.
- You may not earn enough money from your summer job to be required to file a tax return. Even if that’s true, you may still want to file. For example, if your employer withheld income tax from your pay, you’ll have to file a return to get your taxes refunded.
To Learn More About Summer Job Taxes
If you have any questions about tax withholding, estimated tax deposits, or filing tax returns, contact a tax professional for guidance.