From our CPA office in St. Petersburg, FL – If your child is a student and works a summer job or part-time jobs during the school year, then the following should be noted:
1. All taxpayers complete a W-4 when starting a new job. This form is used by employers to determine the amount of tax withholding from each paycheck. Taxpayers with multiple jobs over the year need to be sure they are having an adequate amount of taxes withheld to cover their total income tax liability.
2. Any tip income received is taxable and subject to federal income tax.
3. Many students do odd jobs over the summer or during the school year, such as baby-sitting or lawn mowing. Income from these “self-employment” situations is subject to income tax.
4. Net earnings of $400 or more from self-employment is also subject to the self-employment tax. This tax pays for benefits under the Social Security and Medicare systems. Wage earners have this tax withheld from their paychecks.
5. 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. Special rules apply to services performed as a newspaper carrier or distributor. Taxpayers are considered a direct seller and treated as self-employed for federal tax purposes if (1) they are in the business of delivering newspapers, (2) all pay for services are directly related to sales rather than the number of hours worked, and (3) delivery services are performed under a written contract which states that the seller will not be treated as an employee for federal tax purposes.
7. Generally, newspaper carriers or distributors under the age of 18 are not subject to the self-employment tax.
A student’s work schedule is sometimes a patchwork of odd jobs – which makes for confusion come tax time. Contact us if you have any questions about income earned by your child. As tax professionals, McAtee & Associates can help both individual and business taxpayers with all their tax matters.
ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.
