June 1, 2013
Many students hold a summer job during their time off from school. Here are some tax issues that should be considered when working a summer job.
3. Cash Jobs – Many students do odd jobs over the summer and are paid in cash. Just because the job is paid in cash does not mean that it is tax-free. Unfortunately, the income is taxable and may be subject to self-employment taxes (see below). These earnings include income from odd jobs like babysitting and lawn mowing.
4. Self-Employment Tax – When an individual works for an employer, the employer withholds FICA (Social Security taxes) and Medicare taxes from the employee’s pay, matches the amount dollar for dollar, and remits the combined amount to the government. Self-employed workers are required to pay the combined employee and employer amounts themselves (referred to as self-employment tax) if their net earnings are $400 or more. This tax pays for their benefits under the Social Security system. Even if a worker is not liable for income tax, this 15.3% tax may apply.
5. ROTC Students – 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.
6. Newspaper Carrier or Distributor – Special rules apply to services performed as a newspaper carrier or distributor. An individual is a direct seller and treated as self-employed for federal tax purposes under the following conditions:
7. Newspaper Carriers or Distributors Under Age 18 – Generally, newspaper carriers or distributors under age 18 are not subject to self-employment tax.
Please call this office if you have additional questions.
The combination of running a business and your life and preparing for tax time can drive some people into a slight panic. But no need to get stressed if you are prepared. Now is the time to start organizing all documents required to file your tax return.
Like the old paraphrased saying goes: In this world, two things are certain—death and taxes. The recent federal tax overhaul changed a lot of rules, so it’s as important as ever to understand your tax obligations, including those on Social Security benefits.
Unfortunately, cyber scammers never take a vacation. In fact, the IRS has issued a warning of a surge in fraudulent emails that bait potential phishing victims with fake tax transcripts. Links within these emails lead recipients to documents containing the well-known malware, Emotet.