Summer is the time that most of our students experience their FIRST paid employment. What an eye opener! Welcome to the real world! This includes paying taxes to support the place where we live, our state and our nation. Those sidewalks and roads that you use to get to work are usually paid for with yours and my tax dollars.
Your employer will ask you to fill out a Form W-4 (Employee’s Withholding Allowance Certificate) before you receive your first paycheck as an employee. If you are considered a sub-contractor, you will be asked to fill out a Form W-9 (Request for Taxpayer Indentification Number and Certification). If you or your students have questions on how to fill out these forms, don’t hestitate to call me. It is very important to fill these forms out correctly so that there are NO SURPRISES at year end.
Some facts that students who have summer jobs and/or work through-out the year should know:
When you are considered an employee your employer will withhold taxes from your paycheck. The information you provide on your W-4 form will provide the basis for the withholding of taxes. If you get “Tips” you must keep a log so that they can be reported. You must report $20.00 or more in cash tips in any one month to your employer.
If you are considered self-employed (filled out Form W-9) you need to keep good records of expenses that are related to your work. A major expense usually will be the mileage. Keep a record showing date traveled, reason for the travel and number of miles. These records will be used when you file your income taxes at year end.
If you are in ROTC, your active duty pay, such as pay you get for summer camp is taxable; the subsistence allowance you get while in advanced training isn’t taxable. Special rules apply if you are a newspaper carrier or distributor and you are over eighteen years old. These are just a few of the special rules that apply to students.
You may not earn enough money from your summer job to owe income taxes; however, your employer will withhold Social Security and Medicare taxes from your pay. If you are considered self-employed you will pay these taxes ALL yourself at year end when you file your tax return if your net earnings are over $400.00. These taxes count toward your coverage under the Social Security System.
Even if you do not earn enough to pay taxes you may want to file a return so that you get a refund of the federal and state taxes withheld from your paychecks.
CAUTION!! PARENTS!!
If your student files returns at year end to get a tax refund MAKE SURE HE/SHE DOES NOT CLAIM THEMSELVES. You do not want to loose them as a dependent.
Please call me if I can be of assistance. There are more Good Reasons for our students to work than just paying taxes. All work experiences will be valuable in their futures.