Yesterday was Memorial Day, the unofficial start of summer. And for many students, that means it's about time to start a summer job. But whether it's babysitting, waiting tables, or working at the pool, there's a lot they need to know about taxes.
Here's some advice from the IRS:
1. Don't be surprised when your employer withholds taxes from your paychecks. That's how you pay your taxes when you're an employee
2. As a new employee, you'll need to fill out a Form W-4, Employee's Withholding Allowance Certificate. Your employer will use it to figure how much federal income tax to withhold from your pay. It is possible that filing the W-4 as exempt from withholding might be the correct answer.
3. Keep in mind that all tip income is taxable. If you get tips, you must keep a daily log so you can report them. 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.
4. Money you earn doing work for others is taxable. Some work you do may count as self-employment. This can include jobs like babysitting and lawn mowing. Keep good records of expenses related to your work. You may be able to deduct (subtract) those costs from your income on your tax return. A deduction may help lower your taxes.
Disclaimer: The items included in the Tax Tip Tuesday Video Blog are informational only and are not meant as tax advice. Consult with your tax advisor to determine how any item applies to your situation. IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advise contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein