If you’re seeking a student summer job, we encourage you to go for it. There are, however, a few tax issues you will need to stay on top of, and we’ll be talking about these, so continue reading.

Self-Employment

First things first, if you will be doing odd jobs like dog-walking, mowing lawns, or babysitting, these would be considered self-employment. Although you may receive payment in cash, this income may be subject to tax. Yes, contrary to popular belief, as a self-employed individual, you are expected to declare your earnings and pay your taxes. There is an exception for newspaper carriers or distributors under age 18. If you’re in this category, you are not subject to self-employment tax. A newspaper seller or distributor, however, is subject to federal tax as a self-employed individual if:

-They are in the business of delivering newspapers;
-All of their pay for these services directly relates to sales rather than to the number of hours worked; and
-They perform the delivery services under a written contract that states that they will not be treated as an employee for federal tax purposes.

When a student is employed by a company for the summer, that company would typically withhold Social Security tax and Medicare tax from their income and pay over the total to the government. If a student is self-employed for the summer, then it is their duty to pay the combined employee and employer tax totals on their own. That is, the self-employment tax. This only applies to an individual is their net earnings total $400 or more. This tax paid over to the government will benefit the student in the future, under the Social Security system and Medicare Part A. It is also important to note that even if the student is not exactly subject to paying income tax, the 15.3% tax may apply to their summer odd jobs.

Employed by Parents

If you are under the age of 18, and you are working in a company that is solely owned by your parent/parents for the summer, you will not be subject to income tax. Neither the parents nor children would be expected to pay these taxes. Note that this will not be the same if your parent’s company is set up as a corporation, as, in this case, both parties (parent and child) will be subject to payroll taxes.

What Forms Do I Need To Fill?

If you are a student being employed for the summer, you must fill out a W-4 form for the company you are working with. This form determines the amount of tax to be withheld from your paycheck. If you are working more than one job during the summer, you will need to ensure that all your employers are withholding the correct amount of taxes to cover your income earnings. A student under the age of 18 who is earning income only from summer or part-time employment and is still the dependent of someone else can earn up to $12,950 (the standard deduction amount for 2022) without being liable for income tax. However, if that student actually has some sort of investment income, the tax determination can become a little complex in this instance, as special rules will apply if the student is still a dependent.

W-4 Form or W-9 Form?

If you are employed by a company, you will be expected to complete a W-4 form. Be wary of companies who prefer to pay you in cash in order to abandon their payroll responsibilities. These companies incorrectly treat summer student workers as independent contractors and tend to ask the student to complete a W-9 form instead of the W-4 form or request the student’s Social Security Number (SSN) without requesting a W-4. In this instance, it would be the student’s responsibility to fulfill the tax responsibilities for themselves as well as their employer, which means the student is hired as a self-employed individual.

Are Tips Earned From a Student Summer Job Taxable?

Some student summer jobs can provide the opportunity for earning tips in addition to advertised wages. Unfortunately, tips received from a student summer job, such as waiter or busboy, are subject to federal tax. You are expected to report all tips or $20 and more that are earned within a given month to your employer every month, by the tenth day of the following month. The employer would then withhold the FICA (Social Security and Medicare taxes) and income taxes and includes the tips and wages on the employee’s W-2.

Some employers may attempt to avoid their payroll tax liabilities by paying the student in cash and incorrectly treating them as an independent contractor, thus leaving the student with the responsibility of paying both the employee’s and employer’s payroll tax liability (see self-employment tax below). If a potential employer intends to do that, they will generally ask the student to complete a Form W-9 rather than a W-4 or simply ask for their Social Security Number (SSN) without requesting a W-4.

ROTC Students

If you are an ROTC student that is currently pursuing advanced training, your earnings will not be taxable. All active-duty income, however, including any simmer advanced camps, would be subject to federal tax.

Pension

We know that as a student you are probably not thinking about contributing your summer earnings to your retirement, but if you are, you can start making traditional and ROTH IRA contributions. The choice is yours.

We wish you all the best with your summer job hunt!

We are a professional full-service virtual bookkeeping agency. If you need any assistance with maintaining your books, connect with us. Visit our website or give us a call at (877) 454-2249.