Getting a job in the summer months is a great way for teens and students to earn extra income. If this is your first job, it might also be the first time you’ve ever had to pay taxes. In that case, you probably have a lot of questions about how it all works.
Here is a list of FAQ’s and helpful hints about paying taxes on your summertime income.
Do taxes come out of my paycheck?
Most likely, yes. As you earn income, you are required to pay tax on it.
This is referred to as the pay-as-you-go tax system. There are three types of taxes that could impact your paycheck.
- Social Security and Medicare Tax (FICA)
- Federal Income Tax
- State Income Tax
How much should I be paying in taxes?
That depends. You probably filled out a W-4 withholding form when you started your new job. The information you provided in that form told your employer how much they needed to withhold from your paycheck each pay period for taxes.
You might not earn enough from your summer job to owe income taxes, but your employer is probably required to withhold Social Security and Medicare taxes from your paycheck no matter what.
Tip: If you are unsure how much should be withheld from your paycheck, the IRS Withholding Calculator tool can help you fill out the W-4 form correctly.
Should I pay taxes on tips?
Yes, all tip income is taxable. If you get tips, keep a daily log of your earnings. If you earn more than $20 per month in tips, you must report this income to your employer. And at the end of the year, you must report all tips on your tax return, if you’re required to file taxes.
Do I owe taxes for small jobs like babysitting, lawn mowing, etc.?
Any money you earn doing work for others is taxable. If you earn more in the year, those jobs could count as a small business (or self-employment).
Be sure to keep good records of expenses related to your work. You may be able to deduct those costs from your income when you file your taxes. Tax deductions help lower your taxable income and could result in a bigger tax refund.
I only worked for 3 months. Do I have to file taxes?
You may not earn enough money from your summer job to be required to file a tax return. Even so, you might still want to file. If your employer withheld income tax from your paycheck, you’ll have to file a return to get your tax refund.
If you’re only filing a W-2, you may qualify to file a tax return for free with TaxSlayer. Check out the TaxSlayer Simply Free eligibility requirements.
Read more: Tips for Your First Time Filing Taxes