Tax Tips for Students with a Summer Job

Are you a student with a summer job or the parent of a student with a summer job? Here are seven things you should know about the income earned by students during the summer months.

1. All new employees 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 the withholding is correct, don’t hesitate to call.
2. Whether you are working as a waiter, valet, or a camp counselor, you may receive tips as part of your summer income. You should be aware that tips are considered taxable income and subject to federal income tax. Employees should keep a daily log to accurately report tips and they must report cash tips to their employer for any month that totals $20 or more.
3. From pet sitting to mowing lawns and pulling weeds, many students do odd jobs over the summer to make extra cash. If this is your situation, keep in mind that the earnings you receive from self-employment are subject to income tax.
4. While some 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. This tax pays for your future benefits under the Social Security system.
5. Net earnings of $400 or more from self-employment is taxable, as is church employee income of $108.28 and is reported on Form 1040, Schedule SE. Social Security and Medicare benefits are available to individuals who are self-employed just as they are to wage earners who have Social Security tax and Medicare tax withheld from their wages.
6. 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.
7. 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:

Summer work for students can be a patchwork of odd jobs, which makes for confusion at tax time. Don’t hesitate to call if you have any questions at all about income earned from a summer job.