School's out and many teenagers and other
students have summer jobs for extra spending money. But if you have
a summer job, remember that your employer must withhold taxes, so
not all the money you earn will make it into your pocket.
Six things to consider now - so there aren't any
1. Get Started Right. When you first
start a new job you must fill out a Form
W-4, Employee's Withholding Allowance Certificate. This form is
used by employers to determine the amount of tax that will be
withheld from your paycheck. If you have multiple summer jobs, make
sure all your employers are withholding an adequate amount of taxes
to cover your total income tax liability.
2. A Tip on Tips. If you are working
as a waiter or in some other position where you are receiving tips,
remember this will be part of your summer income. All tips you
receive are taxable income and are subject to federal income
3. Don't Spend It All Now. Many
teenagers/students do odd jobs over the summer to make extra cash.
Earnings you receive from self-employment - including jobs like
baby-sitting and lawn mowing - are subject to income tax. To avoid
a problem later, hold out a portion of your earnings for taxes;
it's better to have some left over if you don't have to pay, than
to come up with the money if you do.
4. Pay Now or Pay Later. If you earn
$400 or more from self-employment, you will have to pay
self-employment tax. This pays for benefits under the Social
Security systems that are available for self-employed individuals,
the same as they are for employees, who have taxes withheld
from their wages. The self-employment tax is figured on Schedule SE, Self-Employment Tax.
5. It's Your Duty. Food and lodging
allowances paid to ROTC students in advanced training are not
taxable. However, active duty pay - such as pay received during
summer camp - is taxable.
6. Read All About It! Special rules
apply to services you perform as a newspaper carrier or
distributor. You are treated as self-employed for federal tax
purposes regardless of your age if you meet the following
More information about income tax withholding and employment
taxes can be found at IRS.gov, the official IRS website.