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William Byrnes (Texas A&M) tax & compliance articles

Tax Information for Students Who Had a Summer Job

Posted by William Byrnes on September 3, 2014

In IRS Special Edition Tax Tip 2014-13, it discussed the tax issues of students who work summer jobs.  Many students take a job in the summer after school lets out. The IRS provided eight tax tips for students who take a summer job.

1. The IRS stated that a student should not be surprised when an employer withholds taxes from the paycheck.  But if the student is self-employed, then he or she may have to pay estimated taxes directly to the IRS on certain dates during the year. This is called a “pay-as-you-go” tax system.

2. As a new employee, a student must complete a Form W-4, Employee’s Withholding Allowance Certificate.  An employer will use it to figure how much federal income tax to withhold from the paycheck. The IRS Withholding Calculator tool on IRS.gov can help a student fill out the form.

3. Keep in mind that all tip income is taxable. If a student receives tips, then the student must keep a daily log so that he or she can report them to the IRS.  A student must report $20 or more in cash tips in any one month to the employer.  All yearly tips must be reported on the tax return.

4. Money earned doing work for others is taxable.  Some work may count as self-employment. This can include jobs like baby-sitting and lawn mowing. Keep good records of expenses related to this work.  Some expenses may be deducted from the income on the tax return. A deduction may help lower the final tax due.

5. If a student is ROTC, then active duty pay, such as pay received for summer camp, is taxable.  But the subsistence allowance while in advanced training is not taxable.

6. A student may not earn enough from a summer job to owe income tax.  But an employer usually must withhold Social Security and Medicare taxes from any pay. If a student is self-employed, then the student must pay these directly to the IRS.  Yet, these count toward coverage under the Social Security system.

7. If a student is a newspaper carrier or distributor, special rules apply. If certain conditions, then the student is considered self-employed.  But if those conditions are not met and the student is under age 18, then the student is usually exempt from Social Security and Medicare taxes.

8. The student may not earn enough money from a summer job to be required to file a tax return. Even if that is true, the student will probably want to file.  For example, if an employer withheld income tax from the paycheck, then the employee will need to file a return to receive a refund of those taxes.  The student can prepare and e-file a tax return for free using IRS Free File.

Finally, see tax rules for students.

2014_tf_on_individuals_small_businesses-m_1Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This book provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

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