|
|
A first summer job is quite an experience for everybody. As for the advantages and the learning opportunities that a summer job offers to the younglings, that is a subject well represented on the internet and not only. Last year, for instance, around 20 million youths between the ages of 16 and 24 were employed in the month of July alone. But, whenever income is involved, you can know for sure some sort of tax implication will follow -- a student’s first summer job makes no difference.
|
|
|
|
|
|
While summer jobs and earnings have expected tax implications for the summer worker, you must be aware there can be an impact on the parents tax return too. So here are the potential tax implications that both the summer worker and their parents need to know to avoid any surprises next tax season.
|
|
 |
|
|
|
|
|
|
|
|
As you know, most taxpayers can earn a certain amount of income each year without having to pay taxes or file a return. However, if you must file a tax return, any income, regardless of when you earn it, must be reported. This means you must report all employment earnings, including those reported on a W-2 by your summer employer.
|
|
|
|
You may not earn enough money from your summer job to owe income tax, but you will probably have to pay Social Security and Medicare taxes. Your employer usually must withhold these taxes from your paycheck.
|
|
|
|
As an employee, you are required to fill out a Form W-4 before beginning your employment to let your employer know how much to withhold for federal and state income taxes. For students working part-time throughout the year, or just over the summer, it may be better to claim zero exemptions to ensure they have enough taxes withheld so they don't owe money to the IRS come tax time.
|
|
|
|
If you get tips, you must keep a daily log so you can report those too. You must report $20 or more in cash tips in any one month to your employer. And you must report all of your yearly tips on your tax return.
|
|
Some work you do may count as self-employment, which may include jobs like baby-sitting and lawn mowing. Keep good records of expenses related to your work. You may be able to deduct those costs from your income on your tax return. Also, if you’re self-employed, you may have to pay self-employment taxes.
|
|
|
| If you’re a newspaper carrier or distributor, special rules apply to your income. Whatever your age, you are treated as self-employed for federal tax purposes if: |
|
|
- You are in the business of delivering newspapers.
|
|
|
- Substantially all your pay for these services directly relates to sales rather than to the number of hours worked.
|
|
|
- You work under a written contract that states the employer will not treat you as an employee for federal tax purposes.
|
|
| If you do not meet these conditions and you are under age 18, then you are usually exempt from Social Security and Medicare tax. |
|
|
|
|
|
|
|
|
|
|
|
|
| If you’re in ROTC, your active duty pay, such as pay you get for summer camp, is taxable. A subsistence allowance you get while in advanced training isn’t taxable. |
|
| When no one else can claim you as a dependent, you can figure out whether filing a tax return is necessary by comparing the total income you earn from your summer job (and all other jobs) to the sum of the standard deduction you can take for the filing status you use plus one personal exemption. If your income is less than this sum, you do not need to file a tax return. This also means you won’t owe any tax on your summer job earnings. |
|
|
Even if you may not earn enough money from your summer job to be required to file a tax return, you may still want to file. For example, if your employer withheld income tax from your pay, you’ll have to file a return to get your taxes refunded.
|
|
|
The ordinary filing thresholds do not apply to you if you’re still claimed as a dependent on your parents’ tax return.
|
|
| A dependent child can have any amount of income and still be claimed as a dependent as long as the child does not provide more than half their own support. This includes gifts, entertainment, food, shelter, clothing, purchasing a vehicle, maintaining a vehicle, other forms of transportation and school expenses. Individuals who can be claimed as a dependent on another taxpayer's return (usually their parent's or legal guardian's) cannot claim their own exemption. This is true even if the other taxpayer chooses not to claim the individual as a dependent. |
|
Working dependents under the age of 17 are still eligible dependents for the Child Tax Credit. If a parent can claim a working 16-year-old as a dependent, the parent can claim the Child Tax Credit, which can be worth up to $1,000 per eligible dependent.
|
|
|
Dependent student income from a summer job, or any job, can have implications on the parent's tax return, such as having one more return for the family tax professional, or loosing some exemption and other tax deductions and credits.
|
|
|
If you are a dependent and you have as little as $400 in self-employment income, you may be required to file an income tax return. If you work for someone else, you are required to file once you have more than $6.100 in income.
|
|
| Students who have earnings from a job, sell stock, have self-employment income, or receive pension income as a beneficiary, must file their own tax return and can't include their income and tax withholdings on a parent's tax return. |
|
|
If your child has a large amount of investment income or self-employment income instead of, or in addition to, a job, their tax return can become very complex and it would be a good idea to talk to a tax professional.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
