The summer internship with a financial institution of his choice has given wings to Jacob’s aspirations. He feels as if his career graph is on the runway to success, all set to take off just the way he wanted it to be. Many students like Jacob, take a job in the summer after school lets out.
If it’s your first job it gives you a chance to learn about the working world. That includes taxes we pay to support the place where we live, our state and our nation.
Here are eight things that students who take a summer job should know about taxes:
2. As a new employee, you’ll need to fill out a Form W-4, Employee’s Withholding Allowance Certificate. Your employer will 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.
3. Keep in mind that all tip income is taxable. If you get tips, you must keep a daily log so you can report them. You must report $20 or more in cash tips in any one month to your employer. And you must report all your yearly tips on your tax return.
4. Money you earn doing work for others is taxable. Some work you do may count as self- employment. This can include jobs like baby-sitting and lawn mowing. Keep good records of expenses related to your work. You may be able to deduct (subtract) those costs from your income on your tax return. A deduction may help lower your taxes.
5. If you’re in ROTC, your active duty pays, such as pay you get for summer camp, is taxable. A subsistence allowance you get while in advanced training isn’t taxable.
6. You may not earn enough 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 toward your coverage under the Social Security system.
7. If you’re a newspaper carrier or distributor, special rules apply. If you meet certain conditions, you’re considered self-employed. If you don’t meet those conditions and are under age 18, you are usually exempt from Social Security and Medicare taxes.
8. You may not earn enough money from your summer job to be required to file a tax return. Even if that’s true, you may still want to file. For example, if your employer withheld income tax from your pay, you’ll have to file a return to get your taxes refunded.
GRADUATES and TAXES:
Just a reminder for new graduates as you step out of college life, into the work environment and the rest of your life. Here are some tax tips:
Each of these choices has limitations based on the income you earn, and whether you are claiming yourself as an exemption or not. Many times, the first year out of college, the parents still claim the graduate child as a dependent. You must make sure you communicate with your parents, to not double claim exemptions, because that is NOT allowed. Usually, the one earning the most money receives a better tax benefit from claiming you as an exemption. Be sure to ask azmoneyguy or your tax professional which is best for your circumstances.
Call today, don’t delay! See how this affects you. We can be reached at 602-264-9331 and on all social media under azmoneyguy.
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