When summer vacation begins, many students will work summer jobs to help pass the time as they wait for the Fall semester of college to begin. Many reasons students work over the summer is to help with summer expenses such as movies with friends, weekend trips to the beach, and sporting events just to name a few. Summer jobs are also a great way to learn new working skills and to pick up on some tax knowledge.
Here are some tips about summer jobs that the IRS would want you to know:
- You will have withholdings from your paycheck for taxes. The amount withheld will be determined once you have filled out a W-4 (Employee's Withholding Allowance Certificate).
- All tip income is taxable. If you receive tips, you should keep a daily log so that you can report them as you go. If your tips exceed $20 in any month, you have to report them on your federal tax return.
- Money that you earned when you performed services for others is taxable. This work could be considered self-employment income which could include anything from babysitting or yard work. If you have any expenses for these types of jobs, you should keep a record and possibly use them as a deduction on your tax return.
- If you are in ROTC, the active duty pay that you receive is taxable. However, a subsistence pay allowance you get while in advanced training is not taxable.
- If you are a newspaper carrier or distributor, special rules will apply to your income. No matter what your age is, you are treated as self-employed for federal tax purposes if:
- You are in the business of delivering newspapers.
- For the most part, all your pay for these activities directly relates to sales than to the number of hours worked.
- You work under a contract that says the employer will not treat you as an employee for federal tax purposes.