MLR

How IRS rules apply to students’ summer jobs

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Students celebrate the coming of summer, but the long, hot days aren’t necessarily carefree.

If you are the parent of high school or college students who will be taking jobs this summer, here are a few things they should know:

  • As a new employee, your son or daughter must fill out a Form W-4, Employee’s Withholding Allowance Certificate. Employers use this form to figure how much federal income tax to withhold from workers’ paychecks. It’s important to complete the W-4 form correctly so the employer can withhold the right amount of taxes. The IRS Withholding Calculator tool at IRS.gov will help students fill out the form.
  • If the job includes tips as part of income, students should remember that all of the tips they receive are taxable. They should keep a daily log to record their tips. If they receive $20 or more in cash tips in any one month, they must report their tips for that month to their employer.
  • If they earn money doing odd jobs this summer, keep in mind that earnings they receive from self-employment are subject to income tax. Self-employment can include pay from jobs like baby-sitting and lawn mowing.
  • They may not earn enough money from their summer jobs to owe income tax, but they will probably have to pay Social Security and Medicare taxes. The employer usually must withhold these taxes from their paychecks. Or, if they’re self-employed, they may have to pay self-employment taxes. Their payment of these taxes contributes to their coverage under the Social Security system.
  • If they are in ROTC, their active duty pay, such as pay received during summer camp, is taxable. However, the food and lodging allowances they receive in advanced training are not.
  • If students are newspaper carriers or distributors, special rules apply to their income. Whatever their age, they are treated as self-employed for federal tax purposes if:
    • They are in the business of delivering newspapers.
    • Substantially all of their pay for these services directly relates to sales rather than to the number of hours worked.
    • They work under a written contract that states the employer will not treat them as employees for federal tax purposes.

If students do not meet these conditions and are under age 18, then they are usually exempt from Social Security and Medicare tax.