At first, working during the summer sounds awful to most young adults. Then they usually stop complaining when their first paycheck arrives. However, they usually start complaining again once they realize that with income, comes taxes.
Meet Form W-4: Employee’s Withholding Allowance Certificate. This form is used by employers to determine the amount of tax that will be withheld from your paychecks to cover your income tax liability. You, along with everybody else, must fill out a W-4 when you start a new job – even if you work at that job for just one day.
Maybe you were lucky and found work as a waiter. Dealing with customers is difficult, but it also means you can get extra money from tips, and who’s going to say no to free,extra money? Unfortunately, you can’t just pocket your tips and forget about them– all tips you receive are taxable income which you must report.
Perhaps you decide you want to be your own boss for the summer. You start doing odd jobs around town: babysitting, mowing your friend’s dad’s lawn, walking your neighbor’spoodle up and down the street. Congratulations on being a young entrepreneur,but the earnings you receive from self-employment are still subject to income tax. And if you end up mowing a lot of lawns and make $400 or more from self-employment, you’ll have to pay a self-employment tax.
If you get a job as paperboy (or girl), at least you’ll be done with work by the time most of America wakes up for work. And teens have special rules when it comes to federal taxes. Because newspaper deliverers are generally treated as self-employed, they have to pay the self-employment tax. However, if you’reunder 18, and you don’t meet all of the carrier self-employment conditions, you are exempt from that tax.
Everyone has to start working at some point. If you have nothing do this summer except wait for school to start, then you might as well start mowing some lawns!
On the Money,
Sufen Wang
Wang Solutions
Wang Solutions 