While summertime awakens thoughts of lounging by the pool and working on your tan, for many it means the start of seasonal work. From high school students looking to get their first real paycheck and teachers seeking part-time work to those in need of additional income for family needs or upcoming vacations, summer jobs can offer countless benefits. To help you make the most of your seasonal income, we’ve compiled some tips to help you thrive, not just survive, your summer job and be prepared by the time tax season rolls around.
Decide if you need to file an income tax return
If you are single and under the age of 65, you are not required to file an income tax return unless you make more than $10,350 – the sum of the IRS’ standard deduction amount and personal exemption amount, which in 2016 was $6,300 and $4,050, respectively. However, there are multiple reasons you may still want or need to file.
Make sure you properly complete your W-4 form
If you’re a student taking your first job, don’t be surprised when your paycheck is less than you are expecting. This is simply one part of paying your taxes. Welcome to adulthood! When you properly complete your W-4 form, you are telling your employer the correct amount of tax to withhold from your paycheck based on your marital status, number of exemptions, dependents and other factors.
Unless you are living on your own and providing more than half of your financial support, you can be claimed as a dependent on your guardian’s tax returns. You can also be claimed as a dependent if you are under 24 and a full-time student. Therefore, make sure to represent that accurately on your W-4 and mark, “I can be claimed on someone else’s return” when filing a tax return in the spring.
Even if you earn less than the standard deduction amount, it could still be smart to file a return to recover any additional income taxes that were withheld. Not only could it result in a little extra cash, but it will be good practice for the future. Parents or guardians claiming a dependent should not include the dependent’s earned income on their taxes.
Keeping up with tips and self-employment taxes
Although often overlooked, the IRS requests that all tips be reported as part of your gross income. While keeping track of tips can be a hassle, it can soon become a simple habit and help you avoid pitfalls associated with IRS penalties in the future.
Do you have plans to do any independent contracting this summer? That could include work such as babysitting and lawn care. If so, the federal law asks that you pay self-employment taxes if you make more than $400 in earnings. By reporting all of this information accurately, you are giving the Social Security Administration a clearer picture of your income, something that could later impact your benefits.