Every summer, many students make use of their free time and begin their search for summer jobs. Having a summer job is a great means to obtain work experience, earn extra money to spend or save for the future. Below are tips that students should keep in mind when they get summer jobs:
1. Withholding and Estimated Tax
As an employee, your employer will generally withhold tax from your paycheck. However, if you are self-employed, you may have to pay taxes to the IRS directly. To do that, you can make estimated tax payments during select payment periods throughout the year in a pay-as-you-go manner.
2. New Employees
Any time you get a new job, you must fill out a Form W-4. This form is the Employee’s Withholding Allowance Certificate, which allows your employer to withhold the correct amount of federal income tax from your paycheck. Use the IRS Withholding Calculator to figure out if you need to fill out a new Form W-4 to avoid having too little or too much income tax taken from your pay.
When you work for someone, the money you earn is taxable. However, some work you perform can count as self-employment. If you work as an independent contractor or as a sole proprietor for a trade or business, are a member of a partnership that supports a trade or business, or are in business for yourself, then you are generally considered as self-employed. Some examples of self-employed jobs are babysitting and dog walking.
4. Tip Income
Tips are taxable income. You should keep and maintain a daily record of your tips. Cash tips received that are $20 or more must be reported to your employer. Make sure you record tips you get throughout the year on your tax return.
5. Payroll Taxes
You may be exempt from owing income tax if you do not earn enough from your summer job. Yet, your employer must still withhold Social Security and Medicare taxes from your paycheck. Those that are self-employed will have to pay those taxes themselves.
6. Newspaper Carriers
Certain rules regarding Social Security and Medicare taxes may apply to a newspaper carrier or distributor. If you meet these specific conditions, you are considered self-employed. If you do not meet these circumstances and are under 18 years old, you may be excused from paying Social Security and Medicare taxes.
7. ROTC Pay
If you are part of ROTC, active duty pay, is taxable.
8. Use IRS Free File
Even if you do not earn enough to be required to file a federal tax return, you may want to still file a return to receive a tax refund. You can easily prepare and e-file your federal tax return free using the IRS Free File.