There are many students who want to use their summer vacation for making some pocket-money for the coming year. Some engage in a summer job in a bid to support their families. Whatever be the case, it will be very useful to become familiar with the IRS guidelines that are meant specifically for those involved in a summer job. The most important seven guidelines are discussed here. These guidelines will help you get a much better grasp about the tax liabilities you must account for if you are on a summer job.
1. A W-4 form for is used for determining the amount of tax withheld. While taking up a new job, you will be asked to enter the required details into a W-4 form. The amount you have to pay as tax will be calculated with the help of this W-4 form. Your employers will withhold this amount from your salary. It is advisable that those involved in multiple summer jobs check whether the tax withdrawals made by their employers are sufficient so that their income tax liability is fulfilled. The Withholding Calculator accessible at IRS.gov will help you ensure that unlawful with-holdings are not made from your salaries.
2. Tips are an unavoidable part of summer income. Contrary to common perception, earnings in the form of tips are liable for taxation. As is the case, you will have to pay federal income tax for the tips you get.
3. Income earned from odd jobs is also taxable. Some students get into jobs that come under the self-employment jobs category, which include odd jobs like baby-sitting and lawn mowing. It should be kept in mind that, income earned from such jobs is also taxable income.
4. Paying self-employment tax can qualify you for Social Security and Medicare benefits. Self-employed individuals with net earnings of $400 or more are liable to pay self-employment tax as well. Paying self-employment tax actually works to your advantage. By doing so, you will be able to enjoy the Social Security and Medicare benefits received by wage earners. In the case of wage earners, Social Security tax and Medicare tax are withheld from their wages. The self-employment tax is figured on Form 1040, Schedule SE.
5. ROTC students do not have to pay taxes for the subsistence allowances they receive as part of advanced training. Not every pay received as part of advanced training escape taxation. Pays such as active duty pay are subject to income tax.
6. Persons working as a newspaper carrier or distributor will have to stick to a unique set of federal tax rules. If you are involved in direct selling, federal tax laws consider you as self-employed provided you are working under the conditions given below:
* You are performing the job of a newspaper carrier or distributor.
* Number of working hours is completely irrelevant when it comes to the money you earn for these services. The money earned depends wholly on the sales.
* While serving as a newspaper carrier or distributor, you are contracted in such a way that you are not considered as an employee as far as federal taxation is concerned.
7. Under 18 newspaper carriers or distributors are exempted from paying self employment tax.