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Tax Tips for Students with a Summer Job

7/7/2015

By: Gary M. DellaPosta, CPA

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

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 our office.

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.

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.

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.

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.

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.

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 your tax preparer or financial advisor for more information!

Gary DellaPosta is a CPA and founder of the firm: Gary M DellaPosta, CPA's & Business Advisors. A graduate of Bryant University, he is a member of the American Institute of CPA's as well as the Massachusetts Society of CPA's. In addition to providing accounting, tax and advisory services to individuals and businesses, he also provides litigation support to attorneys and has been recognized as an expert in numerous Massachusetts' courts. Mr. DellaPosta serves on the Board of the Barnstable County Mutual Insurance Co., where he serves on the audit, investment and employee benefit committees. He is a Director at The Cooperative Bank of Cape Cod, where he serves on audit, governance, and personnel committees, and is a former director of Eastern Bank and Plymouth Savings Bank. He also serves as the Treasurer of the Community Health Center of Cape Cod and is a trustee of Heritage Museum & Gardens.

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Financial Friday ~ Seven Tax Tips for Students with a Summer Job

8/9/2013

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By: Gary M. DellaPosta, CPA

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

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.
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 and is therefore subject to federal income tax.
Many students do odd jobs over the summer to make extra cash. If this is your situation, keep in mind that earnings you receive from self-employment are subject to income tax. This includes income from odd jobs like baby-sitting and lawn mowing.
If you have net earnings of $400 or more from self-employment, you also have to pay self-employment tax. (Church employee income of $108.28 or more must also pay.) This tax pays for your 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.
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.
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:

You are in the business of delivering newspapers.
All your pay for these services directly relates to sales rather than to the number of hours worked.

You perform the delivery services under a written contract which states that you will not be treated as an employee for federal tax purposes.

Generally, newspaper carriers or distributors under age 18 are not subject to self-employment tax.

*reprinted with full permission from http://www.dellapostacpa.com/

Gary DellaPosta is a CPA and founder of the firm: Gary M DellaPosta, CPA's & Business Advisors. A graduate of Bryant
University, he is a member of the American Institute of CPA's as well as the Massachusetts Society of CPA's. In addition to providing accounting, tax and advisory services to individuals and businesses, he also provides litigation support to attorneys and has been recognized as an expert in numerous Massachusetts' courts. Mr. DellaPosta serves on the Board of the Barnstable County Mutual Insurance Co., where he serves on the audit, investment and employee benefit committees. He also serves as the Treasurer of the Community Health Center of Cape Cod, is a Director at The Cooperative Bank of Cape Cod and is a former director of Eastern Bank and Plymouth Savings Bank.

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Tax Tips for Students with a Summer Job

Financial Friday ~ Seven Tax Tips for Students with a Summer Job

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