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Tax Tips for Students with Summer Jobs

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Tax Tips for Students with Summer Jobs

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Students often get a job in the summer. If it’s your first job it gives you a chance to learn about work and paying tax. The tax you pay supports your home town, your state and our nation. Here are some tips students should know about summer jobs and taxes:

Your First Job. At the end of your first week on the job, you get your paycheck only to find out that a chunk of money is gone. Your employer has taken out–or withheld–the taxes you owe. Employers withhold money for federal income taxes, social security taxes, and state and local income taxes in some states and localities.

Taxes are payments of money to the government that provide public goods and services for the community. Some examples of public goods are national defense, street lights, and roads and highways. Public services include welfare programs, sanitation, law enforcement, and education.

When you start a new job, your employer will ask you to provide information on Form W-4, Employee’s Withholding Allowance Certificate. This will help your employer determine how much money to withhold from your wages.

By January 31 of each year, your employer (even if you don’t work there anymore) will give you an IRS Form W-2, Wage and Tax Statement, showing how much you earned in wages, tips and other compensation from the previous year. It will also show the state and federal taxes, social security, Medicare wages, and tips withheld. You will need this form when you file your tax return.

Withholding and Estimated Tax. If you are self-employed, you may have to pay estimated tax directly to the IRS on set dates during the year. This is how our pay-as-you-go tax system works.

New Employees.When you get a new job, you will need to fill out a Form W-4, Employee’s Withholding Allowance Certificate. Employers use it to figure how much federal income tax to withhold from your pay. The IRS Withholding Calculator tool on IRS.gov can help you fill out the form.

Self-Employment.  Money you earn doing work for others is taxable. Some work you do may count as self-employment. These can be jobs like baby-sitting or lawn care. Keep good records of your income and expenses related to your work. You may be able to deduct (subtract) those costs from your income on your tax return. A deduction can cut taxes.

Tip Income.  All tip income is taxable. Keep a daily log to report them. You must report $20 or more in cash tips in any one month to your employer. And you must report all of your yearly tips on your tax return.

Payroll Taxes.  You may earn too little from your summer job to owe income tax. But your employer usually must withhold social security and Medicare taxes from your pay. If you’re self-employed, you may have to pay them yourself. They count for your coverage under the Social Security system.

Newspaper Carriers.Special rules apply to a newspaper carrier or distributor. If you meet certain conditions, you are self-employed. If you do not meet those conditions, and are under age 18, you may be exempt from social security and Medicare taxes.

ROTC Pay.  If you’re in ROTC, active duty pay, such as pay you get for summer camp, is taxable. A subsistence allowance you get while in advanced training is not taxable.

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