Retail stores across the nation prepared for the busy holiday season by hiring between 700,000 and 750,000 seasonal employees, according to the National Retail Federation. Even more seasonal positions were created in transportation, manufacturing and fulfillment.
If you are one of the holiday hires, you may have questions about how the extra money will affect your tax filing. However, seasonal employees are subject to the same tax withholding rules that apply to other employees, according to the IRS. It’s the same as when you earn income from a full-time job.
The extra income feels good in your pockets but it could affect your tax liability. There are a few things you should know to avoid unwelcome surprises.
- Should you file a return? The amount of money you earn from a holiday or other seasonal job may not require you to file a tax return. It’s not necessary if your wages are less than the standard deduction for your filing status and one personal exemption. This could apply to college or high school students that find work during school breaks and it’s their sole source of income.
- Are you receiving tips? If so, you’ll need to report them as part of your gross income for the tax year. Your employer might not keep track, and even if they do, it’s a good idea to keep your own records of tips your receive.
- What is your withholding? Examine your first pay stub to make sure your employer deducts the correct amount based on your filing status and allowance amount. Know what payroll deductions you have including state income tax, Social Security tax, Medicare tax and local taxes. You will want to file if you’re eligible to receive a refund of any taxes withheld.
Happy holidays from TaxSlayer!