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Tax facts for seasonal job seekers

FS-2018-15, August 2018

Students and other taxpayers often obtain seasonal jobs to earn extra spending money or to save for later. But many don't realize that they need to report money they make from a part-time or temporary job to the Internal Revenue Service.

The IRS offers these facts for those working seasonal jobs and other part-time employment.

New employees

When a person gets a new job, regardless of the duration, they need to complete a Form W-4, Employee’s Withholding Allowance Certificate. Employers use this form to calculate how much federal income tax to withhold from an employee’s pay.

The Tax Cuts and Jobs Act made changes to the tax law, including increasing the standard deduction, eliminating personal exemptions, increasing the child tax credit, limiting or discontinuing certain deductions and changing the tax rates and brackets. These changes will affect 2018 tax returns filed next year.

Any changes that a part-year employee makes to their withholding can affect each paycheck in a larger way than employees who work year-round.

The Withholding Calculator, a special tool on IRS.gov, can help taxpayers with part-year employment estimate their income, credits, adjustments and deductions more accurately and check if they have the right amount of tax withheld for their financial situation.

The IRS encourages taxpayers who work seasonal jobs or are employed part of the year to visit the Withholding Calculator and perform a “paycheck checkup.”

Self-employment

Some workers are considered self-employed and responsible for paying taxes directly to the IRS. One way to do that is by making estimated tax payments during the year.

The Tax Cuts and Jobs Act changed the way tax is calculated for most taxpayers, including those with substantial income not subject to withholding. As a result, many taxpayers may need to raise or lower the amount of tax they pay each quarter through the estimated tax system.

The revised estimated tax package, Form 1040-ES, on IRS.gov is designed to help taxpayers figure these payments correctly. The package includes a quick rundown of key tax changes, income tax rate schedules for 2018 and a useful worksheet for figuring the right amount to pay.

Tip income

Taxpayers earning tip income need to report it. It’s a good idea to keep a daily log for accurate reference when working any position, permanent or temporary, that involves tips. Note: taxpayers need to report cash tips of $20 or more during any single month to their employer.

Publication 531, Reporting Tip Income, has more information about reporting tip income correctly.

Payroll taxes

At times taxpayers may earn too little from their seasonal work to owe income tax. But, employers usually must withhold Social Security and Medicare taxes from their pay, even if taxpayers don’t expect to qualify for these benefits.

If a taxpayer is self-employed, they generally must pay Social Security and Medicare taxes due.

These taxes pay for benefits under the Social Security system.

Reserve Officers’ Training Corps pay

If a taxpayer participates in a ROTC program, active duty pay, such as pay for summer advanced camp, is taxable. Other allowances the taxpayer may receive may not be taxable. Publication 3, Armed Forces Tax Guide, has more details.

Filing income tax returns

Some students and other taxpayers can prepare and e-file their federal income tax return for free using IRS Free File. IRS.gov has more information about this option and filing for individuals in general.

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