Thinking of taking a summer job next year? Thinking of sending the kids off to camp? Well, the IRS wants you to know that certain summertime jobs and activities are eligible for tax credits and deductions. Great news, isn’t it?
To help taxpayers understand their taxes well and to encourage them to keep their tax liabilities at a minimum, the IRS has some helpful tips to share:
1. Know Your Work Status
Employers must correctly segregate their summertime workers as employees and independent contractors. As for independent contractual workers, they are not subject to tax withholding and are, therefore, required to pay their individual income tax, medicare tax, and Social Security. On the other hand, although employees may not earn enough from their summer jobs, employers are required to withhold Medicare tax and Social Security from their pay.
Employees usually have to file their tax returns under Form W-2, Wage and Tax Statement, disclosing the income details of their summer jobs latest by January 31 of the upcoming year. Apart from the income details, this form also contains the state and federal tax withholding of employees.
2. Check Your Withholding
Every employee must check the amount of the tax withholding of their summer jobs and they should do it so right during the first month of the employment period. This helps employees determine whether or not their employers are withholding the right amount of tax.
One can use the IRS Withholding Calculator to determine the correct amount of tax withholding and if they need to submit a new Form W-4 (Employee’s Withholding Allowance Certificate) to their employer. The results obtained by using the calculator can be used by you not only to adjust your income tax withholding but also to fill out the other necessary details in the form.
3. Donate & Deduct
Over the years there accumulate many things in your house that you may no longer need anymore, but then there are many others out there to whom those exact things might hold great value. So, it wouldn’t be such a bad idea to clean out your home every once in a while and donate the stuff you don’t need to a charitable organization. Not only will you end up making space in your house but your charitable contributions may also be eligible for deductions!
So, if you have all the receipts and necessary proof of your contributions, you can itemize your deductions.
4. Volunteer & Deduct Mileage
Not many are aware of the fact that volunteers who use their personal vehicles to perform charitable services on behalf of a recognized charitable institution, can deduct 14 cents/mile of the distance covered for a good cause. This criterion became official in 2018 itself, so, the IRS suggests you hold on to your mileage receipts from now.
5. Tax Credit For Summer Day Camp Expenses
Often working parents arrange day care service for their children during the school vacation and almost always summer camp is one of the best solutions. Day camp programs are tax favorable as in, the expenses incurred in putting your child in a day camp will most probably be counted as an expense under the Child and Dependent Care Credit. You can check out IRS Publication 503 for further information on this.
6. Get Official Formalities Sorted After Marriage
Newlyweds are required to sort out the official formalities as soon as possible to avoid any tax problems in the future. For instance, name changes should be reported to the Social Security Administration before the next tax season and address changes should be reported to the United States Postal Service. Newlyweds should also use the IRS Withholding Calculator to determine the correct withholding amount for both of them.
7. Maintain A Diligent Tax Returns Filing Record For Refunds
Even if summer job wages aren’t enough for filing a tax return, workers who wish to get a refund should file their tax returns within the due time to get a refund of any income tax withheld from their paycheck. Usually, a return must be filed within three years if you wish to get a refund or else the money will become a part of the US Treasury.
These seven tips by the IRS will surely make things easier for taxpayers and employees working at summer jobs. For a more detailed explanation on the points mentioned above, you can visit IRS.gov/GetReady or you can also get in touch with our expert tax professionals at MyTaxFiler. We’ll be more than happy to help you!