Tax Tips for Students with a Summer Job

Is your child a student with a summer job? Here’s what you should know about the income your child earns over the summer.

1. All taxpayers fill out a W-4 when starting a new job. This form is used by employers to determine the amount of tax that will be withheld from your paycheck. Taxpayers with multiple summer jobs will want to make sure all their employers are withholding an adequate amount of taxes to cover their total income tax liability. If you have any questions about whether your child’s withholding is correct, please call the office.
2. Whether your child is working as a waiter or a camp counselor, he or she may receive tips as part of their summer income. All tip income is taxable and is, therefore, subject to federal income tax.
3. Many students do odd jobs over the summer to make extra cash. If this is your child’s situation, keep in mind that earnings received from self-employment are also subject to income tax. This includes income from odd jobs such as babysitting and lawn mowing.
4. If your child has net earnings of $400 or more from self-employment, he or she also has to pay self-employment tax. (Church employee income of $108.28 or more must also pay.) This tax pays for benefits under the Social Security system. Social Security and Medicare benefits are available to individuals who are self-employed just as they are to wage earners who have Social Security tax and Medicare tax withheld from their wages. The self-employment tax is figured on Form 1040, Schedule SE.
5. Subsistence allowances paid to ROTC students participating in advanced training are not taxable. However, active duty pay–such as pay received during summer advanced camp–is taxable.
6. Special rules apply to services performed as a newspaper carrier or distributor. As direct seller, your child is treated as being self-employed for federal tax purposes if the following conditions are met:
   • Your child is in the business of delivering newspapers.
   • All pay for these services directly relates to sales rather than to the number of hours worked.
   • Delivery services are performed under a written contract which states that your child will not be treated as an employee for federal tax purposes.
7. Generally however, newspaper carriers or distributors under age 18 are not subject to self-employment tax.

A summer work schedule is sometimes a patchwork of odd jobs, which makes for confusion come tax time. Contact a financial adviser or our office if you have any questions at all about income your child earned this summer season.

About Juanita Farmer, CPA

Juanita Farmer writes the blog "Financial Cents". Juanita Farmer. CPA is the Managing Partner of J.D. Farmer & Associates, LLC, a Public accounting firm, located in Germantown, Maryland. Ms Farmer has been practicing in the field of accounting and tax for over 27 years.

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