your tax return, personal finances — June 20, 2014

Make the Most From That Summer job

by Bob Williams

summer job

How quickly the leisure of youth passes. One minute you’re counting the minutes until summer vacation starts – and the next you’re pounding the streets looking for a summer job.  Sorry to burst your bubble, but life doesn’t get any better from here.

But let’s look at this in a positive light. Sure, you won’t have all the beach- and mall-time they hint at in the commercials, but you’ll hopefully have a chunk of change to spend. Or a head start on a semester of college, depending on your plan. And if it’s your very first job, you get to learn first-hand about how to operate in that very scary place called The Real World.

That’s a very important lesson for us all. Whether it’s mowing lawns for the summer, guiding tours at the local museum or waiting tables at the corner coffee shop, our first job gives us the footing and experience we’ll need to navigate our future employment.

Time for the Nuts and Bolts

When we start that first summer job, most of us understand that when we do work for hire, we get paid for that work. But if it is our first job, we may not realize there’s another outstretched hand that has to be satisfied – before we get what’s left over. It’s Uncle Sam. And he’s very persistent. So it’s best to get used to greasing that particular palm now so we can stay out of trouble later.

Here’s how it works:

If you work for someone else, your employer withholds taxes from your paycheck. That’s how you pay your taxes on the money you’ve earned. If you’re self-employed – say you do lawn care during the summer – you’ll have to hold back taxes from the payments you get from clients – or be prepared to pay up when you file your income taxes at the end of the year. In these cases, pay-as-you-go is definitely the way to go.

When you start your news job, you’ll need to fill out a Form W-4, Employee’s Withholding Allowance Certificate. Your employer will use this to figure how much federal income tax to hold out of your pay. Not sure how much to hold back for taxes? You’re not alone. Use the IRS’ Withholding Calculator to get a better idea of where to start.

So, Just What’s Taxable?

The short answer, of course, is: Everything. But since we’re trying to inform you – rather than scare you into perpetual unemployment – we need to qualify that. First, keep in mind that all tip income is taxable. If you get tips from your customers, you’ll need to keep a daily log so you can report them. If you get $20 or more in cash tips in any one month, you’ll have to report them to your employer. And you need to report all of your year’s tips on your tax return.

As we mentioned earlier, some jobs may count as self-employment, such as baby sitting or lawn mowing. In that case, you should keep good records of the expenses related to your work. You may be able to deduct (subtract) those costs from your income on your tax return – and that can help lower your taxes.

If you’re a newspaper carrier or distributor, there are special rules that apply. If you meet the criteria, you may be considered self-employed. But if you do not meet the criteria and you are younger than 18, you are usually exempt from Social Security and Medicare taxes.

Weekend warriors in ROTC will find their active duty pay, such as pay for summer camp, is indeed taxable. But any subsistence allowance they get while in advanced training is not taxable.

In truth, you may not earn enough from your summer job to owe income tax. But if you’re working for someone else, your employer will usually still have to withhold Social Security and Medicare taxes from your pay. If you’re considered self-employed, you may have to pay those taxes yourself. The good news is, both taxes count toward your coverage under the Social Security system, so you’ll get some benefit – just not until later.

And even if you didn’t earn enough money to file a return, you may want to anyway. If your employer withheld income tax from your paychecks, you’ll have to file a return to get those taxes refunded. And of course, remember you can always file a 1040-EZ right here at for free.

Your first summer job can mean a little extra cash in your pocket, improved people skills, and a valuable first step on the road to independence. Master your income tax responsibilities, and there’s not much standing in the way of success.

Now, let’s get to work!

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