Tuesday, July 27, 2021

TAX TIPS FOR STUDENTS WORKING THIS SUMMER - 2021

During the summer many students focus on making money from a summer job. They may want to gain work experience, earn some spending money or help pay for college. Here are some facts all student workers should know about summer jobs and taxes.


Not all the money they earn will make it to their pocket because employers must withhold taxes from their paycheck.


New employees: Employees – including those who are students – normally have taxes withheld from their paychecks by their employer. When anyone gets a new job, they need to fill out a Form W-4, Employee's Withholding Allowance Certificate, and submit it to their employer. Employers use this form to calculate how much federal income tax to withhold from the new employee's pay. The Withholding Estimator on IRS.gov can help a taxpayer fill out this form.





Self-employment: Students who take on jobs like baby-sitting, lawn care or gig economy work are generally self-employed. Money earned from self-employment is taxable, and these workers may be responsible for paying taxes directly to the IRS. One way they can do this is by making estimated tax payments during the year.


Tip income: Students who earn tips as part of their summer income should know tip income is taxable. They should keep a daily log to accurately report tips. They must report cash tips to their employer for any month that totals $20 or more.


Payroll taxes: This tax pays for benefits under the Social Security system. While students may earn too little from their summer job to owe income tax, employers usually must still withhold Social Security and Medicare taxes from their pay. If a student is self-employed, Social Security and Medicare taxes may still be due and are generally paid by the student.


Reserve Officers' Training Corps pay: If a student is in an ROTC program, and receives pay for activities such as summer advanced camp, it is taxable. Other allowances the student may receive – like food and lodging – may not be taxable. The Armed Forces' Tax Guide on IRS.gov provides details

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