During the summer, many students focus on making money from a summer job to gain work experience, earn spending money, or help pay for college.
Whether it’s flipping burgers or filing documents, here are some facts that all student workers should know about summer jobs and taxes:
When you get a new job, you have to fill out a Form W-4, Employee's Withholding Allowance Certificate, and submit it to your employer. Not all the money you earn will make it into your wallet, because employers have to withhold taxes from your paycheck. Employees, including students, normally have taxes withheld from their paychecks by their employer. Employers use form W-4 to calculate how much federal income tax to withhold from your pay. The Withholding Estimator on the IRS website can help you fill out this form.
Self-employment income is taxable, even from odd jobs like cutting grass or babysitting. If employers aren't withholding taxes from your paycheck because you're considered to be self-employed, you may have to pay the taxes to the IRS yourself. If your self-employment earnings are $400 or more, you have to pay self-employment tax. The self-employment tax is figured on Schedule SE (Form 1040), Self-Employment Tax. Students who take on gig economy work are generally considered to be self-employed also. It may be a good idea to set some money aside from each paycheck for taxes if you are considered to be an independent contractor.
You should keep a daily log to accurately report your tip income: Students who earn tips as part of their summer income should know that tip income is taxable. Cash tips must be reported to your employer for any month that totals $20 or more.
If you are self-employed, Social Security and Medicare taxes may still be due and are generally paid by you: 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 paychecks.
Some ROTC pay is taxable: If a student is in an ROTC program and receives pay for activities such as advanced summer camp, that income is taxable. Subsistence allowances for food and lodging may not be taxable. The IRS' Armed Forces' Tax Guide gives more information.
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