Schools Out For the Summer!!!!! However nowadays more teens are opting for summer jobs instead of trips to the lake, putting toes in the sand at the beach, or general Netflix binging. This is a great time for them to learn (at least in a small timeframe) about the working world as well as the impact that paying taxes has on their local community, their state and nation.
Here’s 7 tips for your newly-ordained working teen to roll their eyes over.
1. One thing you’ll need to get used to is that the “hourly” pay you are getting (which may not be much more than minimum wage) will look even smaller once your taxes are removed from your paycheck. Don’t worry, see #7, you may get most of it back.
2. If you’re doing work for someone that pays you without taking taxes out, be prepared that to set aside a portion of that check into a savings account to send back to the IRS on a quarterly basis (every 3 months). This is called paying estimated tax. The law allows for businesses to pay short-term workers as independent contractors and they aren’t repsonsible for sending off that money to the IRS, the worker is. When tax time arrives you’ll receive a report of what that business paid you on Form 1099. The good news is that the estimated tax payments you sent off the IRS may be refunded to you if you paid too much or if you had some out-of-pocket expenses that you can put deduct from your overall income, allowing you to owe less.
3. Keep in mind that all tip income is taxable. If you get tips, you must keep a daily log so you can report them. You must report all of your yearly tips on your tax return.
5. If you’re in ROTC, your active duty pay, such as pay you get for summer camp, is taxable. A subsistence allowance you get while in advanced training isn’t taxable.
6. You may not earn enough from your summer job to owe income tax. But your employer usually must withhold Social Security and Medicare taxes from your pay.
7. You may not earn enough money from your summer job to be required to file a tax return. Even if that’s true, you may still want to file. For example, if your employer withheld income tax from your pay, you’ll have to file a return to get your taxes refunded.