What every student should know about summer jobs and taxes

Planning a summer job during your break from school? That’s great, but keep in mind that you do  have to pay taxes on the money you earn 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 employer 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, use 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. 

• Many students do odd jobs over the summer to make extra cash. Earnings you receive from self-employment, including jobs like babysitting and lawn mowing – are subject to income tax. 

• 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 are subtracted, such as business expenses.

• If you are in the ROTC and participated in advanced training, the subsistence allowance you received is not taxable. However, active duty pay, suchas 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.

IRS Circular 230 Disclosure

Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication