Tax Tips for Students with a Summer Job

Is your child a student with a summer job? Here’s what you should know about the income your child earns over the summer.

  1. All taxpayers fill out a W-4 when starting a new job. This form is used by employers to determine the amount of tax that will be withheld from your paycheck. Taxpayers with multiple summer jobs will want to make sure all their employers are withholding an adequate amount of taxes to cover their total income tax liability. If you have any questions about whether your child’s withholding is correct, please call the office.
  2. Whether your child is working as a waiter or a camp counselor, he or she may receive tips as part of their summer income. All tip income is taxable and is, therefore, subject to federal income tax.
  3. Many students do odd jobs over the summer to make extra cash. If this is your child’s situation, keep in mind that earnings received from self-employment are also subject to income tax. This includes income from odd jobs such as babysitting and lawn mowing.
  4. If your child has net earnings of $400 or more from self-employment, he or she also has to pay self-employment tax. (Church employee income of $108.28 or more must also pay.) This tax pays for benefits under the Social Security system. Social Security and Medicare benefits are available to individuals who are self-employed just as they are to wage earners who have Social Security tax and Medicare tax withheld from their wages. The self-employment tax is figured on Form 1040, Schedule SE.
  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. As direct seller, your child is treated as being self-employed for federal tax purposes if the following conditions are met:
    • Your child is in the business of delivering newspapers.
    • All pay for these services directly relates to sales rather than to the number of hours worked.
    • Delivery services are performed under a written contract which states that your child will not be treated as an employee for federal tax purposes.
  7. Generally however, newspaper carriers or distributors under age 18 are not subject to self-employment tax.

A summer work schedule is sometimes a patchwork of odd jobs, which makes for confusion come tax time. Contact the office if you have any questions at all about income your child earned this summer season.

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10 Tips for Deducting Losses from a Disaster

If you suffer damage to your home or personal property, you may be able to deduct the losses you incur on your federal income tax return. Here are ten tips you should know about deducting casualty losses. Continue reading

Tips on Tips: Are your Tips Taxable?

Do you work at a hair salon, barber shop, casino, golf course, hotel, or restaurant, or do you drive a taxicab? The tip income you receive as an employee from those services is taxable income.

Here are some tips about tips:

  • Tips are taxable. Tips are subject to federal income and Social Security and Medicare taxes, and they may be subject to state income tax as well. The value of noncash tips, such as tickets, passes, or other items of value, is also income and subject to federal income tax.
  • Include tips on your tax return. In your gross income, you must include all cash tips you receive directly from customers, tips added to credit cards, and your share of any tips you receive under a tip-splitting arrangement with fellow employees.
  • Report tips to your employer. If you receive $20 or more in tips in any one month, you should report all your tips to your employer. Your employer is required to withhold federal income, Social Security, and Medicare taxes.
  • Keep a running daily log of your tip income. Be sure to keep track of your tip income throughout the year. If you’d like a copy of the IRS form that helps you record it, please call.

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Receiving Customer Payments: What are your Options?

QuickBooks was designed to make your daily accounting tasks easier, faster, and more accurate. If you’ve been using the software for a while, you’ve probably found that to be true. Some chores, of course, aren’t so enjoyable, like paying bills or reconciling your bank account…Or anything else that has the potential to reduce the balance in your checking accounts. Continue reading

What to do if you haven’t filed a Tax Return

1040Tuesday, April 18, 2017, was the tax deadline for most taxpayers to file their tax returns. If you haven’t filed a 2016 tax return yet, don’t delay. There’s still time–and it’s not as difficult as you think. Continue reading

Renting Out a Vacation Home

Tax rules on rental income from second homes can be complicated, particularly if you rent the home out for several months of the year, but also use the home yourself.

There is, however, one provision that is not complicated. Homeowners who rent out their property for 14 or fewer days a year can pocket the rental income, tax-free. Continue reading

Retirement Plan Options for Small Businesses

businessEmployer-sponsored retirement plans have become a key component for retirement savings. They are also an increasingly important tool for attracting and retaining the high-quality employees you need to compete in today’s competitive environment.

Besides helping employees save for the future, however, instituting a retirement plan can provide you, as the employer, with benefits that enable you to make the most of your business’s assets. Such benefits include:

  • Tax-deferred growth on earnings within the plan
  • Current tax savings on individual contributions to the plan
  • Immediate tax deductions for employer contributions
  • Easy to establish and maintain
  • Low-cost benefit with a highly perceived value by your employees

Here’s an overview of four retirement plans options that can help you and your employees save. Continue reading