Tax Tips For Students
With school coming to an end, are you thinking about a summer job to earn some extra cash?
We here at Abigail Y Murray CPA, LLC want you to understand the important tax implications that may apply to you if you pick up a summer job – whether you’re a college student or high school student.
If you’re committed to making some extra money this summer, whether it’s for spending or savings for college, it’s important to know that not all the money you make this summer will go straight into your pockets.
You might be taking on an exciting new endeavor like a paid internship or perhaps you’ve taken a job at your local popular steakhouse. Either way, a new job is always exciting when you know you’ll be making your own money.
It’s also the perfect time to cultivate your knowledge about federal income taxes, tax returns, and other tax implications.
Did you know that all tip income is taxable?
All the tips you receive at work are considered income, and when you begin the process of filing your income tax return, you must report all the tips that you receive directly.
According to the Internal Revenue Service Publication 531, employees who receive tips must report it on their income tax return, as well as to their employer. Publication 531 of the tax code also implies that the social security tax rate an employee must pay on tips is 6.2% when you report more than $20 in cash tips.
It is highly recommended that you keep a daily record of your tips.
It’s also important to recognize that tax code rules are different depending on the type of work you do. Sometimes, certain jobs qualify as self-employment such as babysitting, newspaper carriers or distributors, and lawn care services among others.
You may be able to deduct certain costs when filing, and if you’re under 18, you will probably be exempt from Medicare and Social Security taxes.
However, you may be required to figure a few things out like the net profit or net loss from your income-generating services. Generally, self-employed individuals are required to pay a self-employment tax as well as income tax.
Contact Abigail Y. Murray, CPA, LLC in McAllen to learn more about the Self-Employment Tax and if it applies to you.
You’ve probably heard about W-4 Forms.
W-4 Forms play a very important role in the current tax system. They are used by your employer and their purpose is to withhold the proper amount of income taxes from your paycheck.
The amount withheld from your paychecks during the time you work is determined in the W-4 Form. There are such things known as Allowances, however, that can give you some control over your paycheck withholdings.
It’s important to be informed about Allowances that may apply to you and how they can affect how big your tax refund is or whether you could even end up owing taxes. We know federal tax talk can be confusing (and undesirable) at times, but the quicker you learn about it, the easier it will be in the future.
By the way, the W in W-4 stands for withhold. That’s what you call a fun tax fact!
If you’re working this summer before going back to school, you’ll likely want to know how to get your withheld income taxes back from the IRS. Starting a new job comes with many responsibilities and we want to help guide you through the processes.
Contact the accounting offices of Abigail Y. Murray, CPA, LLC today at (956) 800-5600. We’re located in McAllen, TX and serve the Greater Rio Grande Valley area. We’re always prepared to answer your questions and give you the best financial advice.