Many students take a job in the summer after school lets out. If it’s your first job, it gives you a chance to learn about the working world. That includes taxes we pay to support the place we live, our state and our nation. Here are a few things you should know about taxes:
Taxes are pay-as-you-go. This means that you need to pay most of your tax during the year, as you receive income, rather than paying at the end of the year. The IRS encourages everyone to use the Withholding Calculator to perform a quick “paycheck checkup.” The Calculator helps you identify your tax withholding to make sure you have the right amount of tax withheld from your paycheck at work. You can use your results from the Calculator to help fill out Form W-4, Employee's Withholding Allowance Certificate.
Money you earn doing work for others is taxable. Some work you do may count as self-employment. This can include jobs like baby-sitting 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.
Generally, income received in the form of tips is taxable. This includes tips received directly from customers, added to credit cards and from a tip-splitting agreement with other employees. You can use the IRS’ Interactive Tax Assistant tool to help you determine if the income you received in the form of tips is taxable.
You may not earn enough from your summer job to owe income tax, but your employer usually must withhold Social Security and Medicare taxes from your pay. If you’re self-employed, you may have to pay them yourself. They count toward your coverage under the Social Security system.
By January 31 of each year, you should receive a Form W-2, Wage and Tax Statement, from your employer (even if you don’t work there anymore) showing how much you earned. It will also show the state and federal taxes, Social Security, Medicare wages, and tips withheld. You will need this form when you file your tax return. Although you may not have earned enough money from your summer job to be required to file a tax return, you may still want to file. You’ll have to file a return to get a refund of any income tax that was withheld. You can prepare and e-file your tax return for free using IRS Free File. It’s available exclusively on IRS.gov.
Visit IRS.gov for more about the tax rules for students.