income — July 17, 2012

Some Things to Remember if You Have a Summer Job

by Jeff McDougall

summer job imageSchool'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 surprises later:

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 tax.

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 conditions:

  • You are in the business of delivering newspapers.
  • All your pay for these services directly relates to sales, rather than to the number of hours worked.
  • You perform delivery services under a written contract that states that you will not be treated as an employee for federal tax purposes. If you do not meet these conditions and you are under age 18, then you are generally exempt from Social Security and Medicare tax.

More information about income tax withholding and employment taxes can be found at, the official IRS website.

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