The hot summer days of college students mowing lawns, caddying on golf courses, washing cars & helping out at their dad’s friend’s law office are almost here. That means earning some dough to put towards savings, beer money & anything else a college student desires. Unfortunately, the summer comes and goes & the income that was earned is often forgotten until tax season arrives. Let’s avoid the procrastination & tackle some of the tricky tax questions that arise when dealing with summer jobs.
1) Complete W-4 Forms!!
If you have multiple summer jobs such as working for a landscaper or being a caddy at a golf course, complete one set of W-4 Forms & allocate or split your exemptions appropriately between employers so you are not subject to tax penalties.
2) You May be Exempt From Federal Withholding – IF:
A) No Income – Had no taxable income last year & don’t expect to have any this year.
B) Dependents – Someone such as a parent claims you as a dependent AND you don’t expect total income over $950 of which there will not be $300 or more of investment income (interest, dividends, capital gains). If you have no investment income your total income can be as high as $5,700 while still qualifying for the exemption.
C) Income Level – If you cannot be claimed as a dependent you still may be exempt but depends on your filing status – single, married, head of household. For instance, if single & your income is not over $9,350, you may be exempt.
Keep in mind that even if you are exempt, you STILL need to complete a W-4 Form.
3) Self Employment Tax
If earnings from self employment are $400 or more, you are subject to a self-employment tax of 15.3% which is in ADDITION to the ordinary tax. The self-employment or social security & medicare tax is figured on Form 1040, Schedule SE.
4) Tips Are Taxable
If you are a waiter or have another job in which tips are given as compensation – keep in mind that you DO have to report all of the additional compensation as income.
5) Save Pay-stubs For Tax Season & the Request W-2 Form
Save all of your pay-stubs especially your last one which contains pertinent tax information that you will need when tax season arrives. It is not completely uncommon for an employer to forget to send a summer intern/employee their W-2 Form during tax season. Be sure to stay on top of them.
6) Education Tax Credits Can Reduce Your Taxable Income
If you are in college and paid for tuition & books you are likely eligible for the education tax credits which you can use to reduce your taxable income & save money! Here are the details to the education tax credits which can be as much as $2,500!
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