Summer Jobs and Taxes: 5 Things to Keep in Mind

Got a summer job? Whether you’re working at a car wash, as a server at your favorite local restaurant or a lifeguard at the public pool, your summer gig may be your first exposure to the wonderful world of taxes.

The IRS has released a summertime tax tip digest highlighting a handful of important points to be aware of when you start a summer job. A few of their key tips:

Meet the W-4. Form W-4, Employee’s Withholding Allowance Certificate, is used by employers to determine the amount of tax that will be withheld from your paycheck. Juggling more than one summer job? The IRS advises you to “make sure all your employers are withholding an adequate amount of taxes to cover your total income tax liability.”

Your tips are taxable. Did you get a tip for your outstanding service? Surely you did, because you’re awesome. But the IRS wants you to know this: “All tips you receive are taxable income and are therefore subject to federal income tax.”

Payment for odd jobs is taxable. Did you mow the neighbors lawn? Set up a family friend’s WiFi network? These are “earnings you receive”– and yes, they’re subject to income tax.

Stay on top of employment taxes. Even if you do not earn enough this summer to owe income tax, you’ll probably end up paying employment taxes — generally, your employer will withhold these from your paycheck. But, per the IRS, “if you earn $400 or more from self-employment, you will have to pay self-employment tax. This pays for benefits under the Social Security system that are available for self-employed individuals the same as they are for employees that have taxes withheld from their wages.”

In the newspaper biz? Special rules apply if you work as a newspaper carrier or distributor — you’re treated as self-employed for federal tax purposes if:
-You are in the business of delivering newspapers
-All your pay for these services directly relates to sales rather than to the number of hours worked
-You perform the delivery services under a written contract which states that you will not be treated as an employee for federal tax purposes
-If you do not meet these conditions and you are under age 18, then you are generally exempt from Social Security and Medicare tax.

A couple other points The Tax Institute at H&R Block urges you to consider this summer :

  • If you are in the Reserve Officer Training Corps and participated in advanced training for ROTC, the subsistence allowance you received is not taxable. However, active duty pay — such as pay received during summer advanced camp — is taxable.
  •  Did you receive gifts of cash or property from family or friends, like a big check for graduation? Generally, the person who receives the gift is not liable for any taxes on the gift. Each year there is a specific maximum amount that may be given that will not create a taxable event to either the giver or the receiver. Gifts in excess of this maximum may be subject to gift taxes by the gift giver.

Additional questions about your summer gig? Sound off in the comments.

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