7 Important Tips For Students Entering The Work Force This Year!
Author: Ron Leyva
Article Source: MiNeeds.com
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Do you have a High School or College Age child who has worked this summer or will be getting their first job sometime this fall? If so then here are seven important tips for you and them to know.
1.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. To make sure your withholding is correct; visit the Withholding Calculator on IRS.gov.
2.Whether you are working as a waiter or a camp counselor, you may receive tips as part of your summer income. All tip income you receive is taxable income and is therefore subject to federal income tax.
3.Many students do odd jobs over the summer to make extra cash. Earnings you received from self-employment are subject to income tax. These earnings include income from odd jobs like baby-sitting and lawn mowing.
4.If you have net earnings of $400 or more from self-employment, you will also have to pay self-employment tax. This tax pays for your benefits under the Social Security system. Social Security and Medicare benefits are available to individuals who are self-employed the same 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 you perform as a newspaper carrier or distributor. You are a direct seller and treated as self-employed for federal tax purposes if you meet the following conditions:
oYou are in the business of delivering newspapers.
oAll your pay for these services directly relates to sales rather than to the number of hours worked.
oYou perform the delivery services under a written contract which states that you will not be treated as an employee for federal tax purposes.
7.Generally, newspaper carriers or distributors under age 18 are not subject to self-employment tax.
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