One of my teens starts her baby sitting gig tomorrow. This tax consultant’s heart swelled up with pride when she asked if there would be taxes on her earnings! Well, wish I could say “no”!
So if you are or you know a student on their first summer job, these are somethings you need to remember:
1. Every new employee has to submit a Form W-4. This is an Employer’s Withholding Certificate, telling them how much you want taken out in taxes from your pay. You can use the Withholding Calculator on irs.gov to help fill out this form.
2. If the employer does not withhold taxes from your pay, you may be liable to send in your own estimates every quarter. This is done using Form 1040-ES. The estimates are due April 15th, June 15th, September 15th and January 15th of the next year.
3. Some of the work that you do may be counted as “Self-Employment”. This may include baby-sitting, lawn mowing etc. If this is so, then you can deduct expenses you had towards earning this money. These income and expenses are shown on Schedule C.
4. If you work in a place where paying tips to the workers is a norm, remember tip income is taxable. Think waiters, golf-caddies etc. One must report $20 or more in cash tips in any one month to your employer. So it is important that you keep a log of the daily tips received. All tips received during the year should be reported on your Form 1040.
5. If you work as a newspaper carrier or distributor, special rules apply. One is considered self-employed if certain conditions apply, if not and one is less than 18 years of age, one could be exempt from social security and medicare taxes.
6. If you are in ROTC (Reserve Officer’s Training Corps), your pay for summer camp is taxable, however the subsistence allowance you get while in advanced training is not taxable.
The summer job may not even pay enough to owe income taxes, however the employer is liable to withhold income taxes, social security and medicare taxes from your pay. If it is so, one may have to file just so one can get a refund of the income taxes withheld. Please contact an Enrolled Agent to help file your taxes.
Bibliography: Form W-4; Form 1040-ES; Schedule C; Tip Income; irs.gov
In accordance with Circular 230 Disclosure
Original Post By: Manasa Nadig
I am Manasa Nadig, enrolled to practice and represent taxpayers with the Internal Revenue Service. I have been in the business of Tax Preparation & Tax Planning since 1999. My firm, MN Tax Solutions, LLC is based in Michigan, USA. Please connect with me on TaxConnections for more information about myself & the services provided by my firm.
1 comment on “Sorry Kids! You May Have To Pay Taxes On Your Summer Jobs!”
Dear Manasa,
Aren’t there certain circumstances under which certain persons to claim exemption from income tax withholding on Form W-4? I believe if the employee received a refund of all federal income tax in the prior year and expects to get a refund of all federal income tax in the current year, he can enter “exempt” on line 7.
As you say, these employees are still liable for employment and certain other taxes.
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