Summer Time is in full swing, and most students are working a summer job. The pay may be meager, but greedy Uncle Sam still wants his cut. Here's the top 7 things the IRS wants everyone to know about income earned while working a summer job:1. Fill out a W-4: Form W-4 is used by employers to determine the amount of tax that will be withheld from your paycheck. This is a good thing, because if you were holding on to the money that should go to the IRS, you'd probably spend it.If you have multiple summer jobs, make sure you have a W-4 for each job.
2.About Tips: Sorry, tips are taxable income according to the federal government. You need to report all tips as income to the IRS.
3. Odd-Job Income: Students often perform odd jobs for extra cash over the summer (e.g., mowing lawns, babysitting.) You're probably not making much, but the IRS wants a cut of the income you make from these odd jobs. In case you're wondering, the IRS will find out how much income you've earned from your bank account. Your bank reports your earnings annually, and if it doesn't match with what you reported, you're busted. If you want to avoid that whole mess you could stimulate the economy and spend the money instead of saving it. (But you didn't hear this from me, kids.)
4. Self-Employment Tax: If you earn a net $400 or more from your business, the IRS wants you to pay self-employment tax. This tax pays for your benefits under the Social Security System. This is done on Form 1040, Schedule SE.
5. Military Training: According to the IRS, 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 newspaper carriers or distributors. The IRS will consider you a direct seller if:
• You are in the business of delivering newspapers.
• All your pay received directly relates to sales, not 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. Finally, Some Good News: In most cases, newspaper carriers or distributors under age 18 are not subject to self-employment tax.