Music students and teenagers often get summer jobs. This is a great way to earn extra spending money or to save for later. The IRS offers a few tax tips for taxpayers with the summer job, withholding, and estimated tax. Students and teenage employees normally have taxes withheld from their paychecks by the employer. Some workers are considered self-employed and may be responsible for paying taxes directly to the IRS. One way to do that is by making estimated tax payments during the year. New employees, when a person gets a new job, they need to fill out a Form W-4, Employee's Withholding Allowance Certificate. Employers use this form to calculate how much federal income tax to withhold from the employee's pay. The IRS withholding calculator, located at irs.gov, can help a taxpayer fill out the form. Self-employment. A taxpayer may engage in types of work that may be considered self-employment. Money earned from self-employment is taxable. Self-employment work can be jobs like babysitting or lawn care. Keep good records on money received and expenses paid related to the work. IRS rules may allow some, if not all, costs associated with self-employment to be deducted. A tax deduction generally reduces the taxes you pay. Tip income. Employees should report tip income. Keep a daily log to accurately report tips. Report tips of $20 or more received in cash in any single month to the employer. Payroll taxes. Taxpayers may earn too little from their summer job to owe income tax. Employers usually must withhold Social Security and Medicare taxes from their pay. If a taxpayer is self-employed, then Social Security and Medicare taxes may still be due and are generally paid by the taxpayer in a timely manner. Newspaper carriers. Special rules apply to a newspaper carrier or distributor. If a person meets certain conditions,...
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Do employers have to pay taxes on tips? Form: What You Should Know
Questions to Ask Your Employer About Tips The following questions may help clarify any tax issues your employer might be facing with tipped employees. Read to your benefit if any of the following apply to you: 1. Your employees are regularly tipping, and you may be subject to additional tax withholding. What are the rules? 2. What if your employees are all low wageworkers, and you do not make a profit on tipped wages because the tips go straight to the employer? 3. You receive tips from several employees, and each receives tips different from the ones you make more. What do you do? 4. Why are you required to withhold taxes on your employees' tips if these employees do not make income from tips? 5. Your employees often make tips for you, and you do not get a big cut or percentage of the tips. What do you do? 6. What if your employees have a party for their bosses' birthday? What if a friend who is a restaurant owner offers to host? What if the host takes your employees to a restaurant for free? What if a supervisor gets his or her employee to give tips? What if you donate your employee's hours to a charity? 7. Your employees are making a good living, but the IRS is making them think twice when they ask for more money. Are you covered? If not, how will the IRS treat you? How much will you have to pay in taxes? How much will your employees get from your tips? Tips from Tipped Employees Are Not a Qualified Commodity Tips are not considered to be a “fruits and vegetables” under IRC § 5101(a)(2) or as compensation for performing services for hire, in Under these rules, tips do not necessarily constitute “commodities” for IRC § 5101(a)(2). A tip is not considered a “commodity” for IRC § 5101(a)(2) if: (1) it is a gratuity, (2) under certain circumstances a tip, or (3) it is paid for personal services. See Tipping and Related Issues for more information. The Tip Credit In IRC § 5119(a)(1), the IRS offers a credit against the tax imposed on employers who pay tips to their employees.
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