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IRS Tips for Students with Summer Jobs
Many students get a summer job during their time off from school. Here are the top seven things the IRS wants everyone to know about income earned while working a summer job.
1. Taxpayers fill out a W-4 when starting a new job. This form is used by employers to determine the amount of tax that will be withheld from your paycheck. Taxpayers with multiple summer jobs will want to make sure all their employers are withholding an adequate amount of taxes to cover their total income tax liability. To make sure your withholding is correct, visit the Withholding Calculator on IRS.gov.
2. Whether you are working as a waiter or a camp counselor, you may receive tips as part of your summer income. All tip income you receive is taxable income and is therefore subject to federal income tax.
3. Many students do odd jobs over the summer to make extra cash. Earnings you received from self-employment are subject to income tax. These earnings include income from odd jobs like baby-sitting and lawn mowing.
4. If you have net earnings of $400 or more from self-employment, you will also have to pay self-employment tax. This tax pays for your benefits under the Social Security system. Social Security and Medicare benefits are available to individuals who are self-employed the same as they are to wage earners who have Social Security tax and Medicare tax withheld from their wages. The self-employment tax is figured on Form 1040, Schedule SE.
5. Subsistence allowances paid to ROTC students participating in advanced training are not taxable. However, active duty pay – such as pay received during summer advanced camp – is taxable.
6. Special rules apply to services you perform as a newspaper carrier or distributor. You are a direct seller and treated as self-employed for federal tax purposes if you meet the following conditions:
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.
7. Generally, newspaper carriers or distributors under age 18 are not subject to self-employment tax.
Highlights of the American Recovery and Reinvestment Act of 2009
Here are some key highlights:
Increased Transportation Subsidy. Employer-provided benefits for transit and parking are up in 2009
Up to $2,400 in Unemployment Benefits Tax Free in 2009. Individuals should check their tax withholding.
Net Operating Loss Carryback. Small businesses can offset losses by getting refunds on taxes paid up to five years ago. Information on the carryback, an expanded section 179 deduction and other business-related provisions is now available.
COBRA: Health Insurance Continuation Subsidy. The IRS has extensive guidance for employers, including an updated Form 941, as well as information for qualifying individuals.
First-Time Homebuyer Credit Expands. Homebuyers who purchase in 2009 can get a credit of up to $8,000 with no payback requirement.
Enchanced Credits for Tax Years 2009, 2010. Details available on the earned income tax credit, additional child tax credit and American Opportunity Credit, a new higher education benefit.
Payroll Checks Increase This Spring. The Making Work Pay Tax Credit will mean $400 to $800 for many Americans. The IRS has issued new withholding tables for employers.
$250 for Social Security Recipients, Veterans and Railroad Retirees. The Economic Recovery Payment will be paid by the Social Security Administration, Department of Veterans Affairs and the Railroad Retirement Board.
Stacie's Tax Stuff 