For those students who are starting their summer jobs, the IRS has some tips to ensure compliance. According to the IRS website, these tips are meant to remind young taxpayers that not all the money they make will be theirs to keep, as employers are required to withhold taxes.
1. Upon starting a new job, make sure to fill out Form W-4, Employee’s Withholding Allowance Certificate, the form used to determine the amount of tax that will be withheld from each paycheck. For those students who have more than one job, make sure that each employer with withholding an adequate amount to cover the total income liability.
2. If you receive tips as part of your income, be aware that all tips received are taxable income and must be reported.
3. Earnings you receive from self-employment—any of those odd jobs to make extra money—are subject to income tax.
4. For those who are earning more than $400 from self-employment, those earnings are subject to the self-employment tax. This tax will pay for your benefits under the Social Security system.
5. ROTC students participating in active training do not have to pay tax on food and lodging allowances, but any active duty pay is taxable.
6. Newspaper carries or distributors can’t be as carefree as the movies make it seem. If you are in the business of delivering newspapers , all your pay relates directly to the number of sales instead of the number of hours worked, and the written contract under which you work states that you will not be treated as an employee for tax purposes, you are considered a direct seller are considered self-employed.
The IRS would like for tax compliance to start early!
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