Whether you’re trying to make a little extra cash before the school year starts back up, or you’re just bored—summer jobs are a great way to put a little something in your pockets. But just because the summer is void of tests and studying, doesn’t mean you get a free ride from every angle. That summer job you have right now will still have to be reported come tax time.
Here are a few tips to help you be sure you’re in line with what the Tax Man expects:
1) Tips are taxable
A tip is considered income, so you have to report it on your return. Be sure to keep track of exactly how much you’re given. You’ll report this on Form 4137, which TurboTax will help you fill out (so don’t worry about having to track the form down).
2) Odd jobs aren’t exempt
Even if you’re just mowing a few of your neighbors’ lawns, you still have to report the money you receive for that service as income tax. This type of income is considered self employment income, so be sure to report it correctly (using a Schedule C). And good news! TurboTax will walk you through this process as well.
3) If you make $400 or more from your odd job, you have to pay self-employment tax
You may be the entrepreneurial type and turn your lawn mowing gig into something a little more lucrative. If you make over $400 from this, you’ll need to not only pay income tax on your earnings, but self-employment tax as well (this is what pays for Social Security and Medicare). This tax will be figured on Form 1040, Schedule SE—surprise, surprise, TurboTax has you covered.
4) Fill out a W-4 Form
This may be a no brainer, but fill out a W-4 no matter how trivial the job may seem. If you have a boss, you should have tax withholdings. Doing so will make sure the right amount of taxes are being taken out of each paycheck so you hopefully won’t have to pay when you file a return.
5) Newspaper carriers have some unique rules when it comes to taxes
You must meet a few conditions to be considered a direct seller and therefore treated as self employed:
- You are in the business of delivering newspapers
- Your pay is directly related to sales instead of how many hours you worked
- You deliver under a written contract that specifies you are not treated as an employee for federal tax purposes.
6) Most of the time, newspaper carriers that are under 18 aren’t regulated to self-employment tax
7) If you’re in ROTC, subsistence allowances from advanced training are not taxable
The caveat to this is that active duty pay (like the pay you received while participating in a summer advanced camp) is taxable like any other income. You’ll get a W-2 just like with any other job, so be on the lookout at the end of the year.
And there it is! A few tips to keep in mind while earning a little extra money. Pretty simple. Now, one more bonus tip….try to relax a little, the summer is too short as it is.