A summer job can be a great way to earn extra money, gain work experience, and learn a few tax basics along the way. Whether you're saving for school, covering everyday expenses, or spending time with friends during break, it's important to understand how your earnings may affect your taxes.
What Do I Need to Know About Summer Jobs?
Here are some important tax tips for students who work during the summer or throughout the year:
Taxes May Be Withheld From Your Paycheck
When you start a job as an employee, you'll usually complete Form W-4, Employee's Withholding Certificate. The information you provide helps your employer determine how much federal income tax to withhold from your paycheck.
You may also see deductions for Social Security, Medicare, and state income taxes (if applicable).
Tips Are Taxable Income
If you receive tips at work, such as from a restaurant or service job, keep accurate records of what you earn.
If your tips total $20 or more in a single month while working for one employer, you're generally required to report those tips to your employer. Tips are taxable income and must be included on your tax return.
Self-Employment Income Counts Too
Not all student income comes from a traditional job. Money earned from activities such as:
- Babysitting
- Lawn care
- Tutoring
- Pet sitting
- Freelance or gig work
is generally considered self-employment income.
Keep records of the money you earn and any business-related expenses you pay. Depending on your situation, some expenses may be deductible and can help reduce your taxable income.
You may also need to pay self-employment tax if your net earnings meet IRS filing requirements.
ROTC Pay May Be Taxable
If you're enrolled in the Reserve Officers' Training Corps (ROTC), some payments may be taxable while others may not.
Generally:
- Active-duty pay is taxable.
- Certain subsistence allowances received during advanced training are typically not taxable.
Keep any tax documents you receive and review them carefully when preparing your return.
Special Rules for Newspaper Carriers and Distributors
Special tax rules may apply if you deliver or distribute newspapers.
Regardless of your age, you may be treated as self-employed for federal tax purposes if all of the following apply:
- You're in the business of delivering newspapers.
- Your pay is based primarily on sales or distribution results rather than hours worked.
- You work under a contract stating that you won't be treated as an employee for federal tax purposes.
If these rules apply to you, you may need to report your earnings as self-employment income.
Do Students Need to File a Tax Return?
Maybe. Filing requirements depend on several factors, including:
- Your age
- Your filing status
- Whether someone else can claim you as a dependent
- The amount and type of income you earned
Even if you're not required to file, it may still be worthwhile if federal income tax was withheld from your paycheck and you're eligible for a refund.
Keep Good Records Throughout the Year
No matter what type of work you do, save documents such as:
- Forms W-2 from employers
- Forms 1099 for contract or gig work
- Pay stubs
- Tip records
- Receipts for work-related expenses
Good recordkeeping makes filing your tax return much easier and helps ensure you claim any deductions or credits you're entitled to receive.