income — June 17, 2013

Don't be Singing the Summertime Blues

by Bob Williams

summer job tips

Ah, 1968. Riding down the road in my Chevelle SS, Blue Cheer on the radio, and singing at the top of our lungs, “There ain’t no cure for the summertime blues.” (Insert air guitar riff here.)

Stop the music.

Actually, we were wrong.

Seems there IS a cure for the summertime blues. And it comes, believe it or not, from the IRS. Who knew?

The problem here is that all too often, young folks out of high school or college for the summer start dipping their toes into what we adults cryptically call “The Real World,” without knowing just how to navigate it all. So here’s a little roadmap that can help our summer job seekers keep the volume up and still hit the high notes.

Know the Paperwork

As a new employee – even a temporary one – you’ll have to fill out a Form W-4, Employee’s Withholding Allowance Certificate. Your employer will use this form to figure out how much federal income tax to hold back from your paychecks. Take your time and fill it out as correctly as you can.

Tip on Tips

If you’re going to get tips as part of your summer income, remember, they are indeed taxable. Keep a daily log of your tips. If you get more than $20 in cash tips in any one month, you’ll need to report that to your employer.

Doing odd jobs this summer? The IRS sees that as self-employment, along with baby-sitting and lawn mowing. And yes, your income from these activities may be subject to income tax.

You might not make enough over the course of your summer to owe income tax, but you’ll probably have to pay Social Security and Medicare taxes. If you’re working for someone, they’ll have to withhold these from your check. If you’re self-employed, you may have to pay self-employment tax, which contributes to your coverage under the Social Security system.

Read All About It

If you have a newspaper route or do contract distribution, you are treated as self-employed if: You are in the business of delivering newspapers; your pay is based mostly on the number of papers delivered (rather than hours worked); and you work with a contract that says the employer doesn’t treat you as an employee for tax purposes. If you do not meet these conditions and you’re under 18, you’re off the hook. You’re generally exempt from Social Security and Medicare tax.

For those in ROTC, active duty pay – like pay received during summer camp – is taxable. But the food and lodging allowances you may get in advanced training are not.

We hope we’ve helped to lay out the landscape a little for you first-time drivers on Responsibility Road. And take a little advice from us grizzled veterans of the Real World – even with the daily grind, there will always be time for us to drop the top, crank up the radio, and hit the high road.

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