Tax tips: what facts should students working summer jobs know?

The IRS constantly issues reminders and tips on its website and social media accounts to let taxpayers know how they can avoid scams, fees, penalties and help them get the payments they are entitled to.  What facts has the agency said all students working summer jobs should know?

During the summer many students focus on making money from a summer job. What facts has the agency said all students working summer jobs should know?

For many different reasons like wanting to gain work experience, earn some spending money or help pay for college, students decide to work during summer break. Here are some facts the IRS has said all student workers should know about these jobs and taxes.

To start with, students must know from the start that they will not be able to save all the money they earn because employers must withhold taxes from their paycheck.

New employees: Employees – including students – normally have taxes withheld from their paychecks by their employer. They will need to fill out a Form W-4, Employee's Withholding Allowance Certificate, and submit it to their employer, who will use this form to calculate how much federal income tax to withhold from the new employee's pay.

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

Tip income: Students who earn tips should know that tip income is taxable, so they should keep a daily log to accurately report tips and 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.

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