Monthly Newsletter for August 2016

by in Newsletter on Jul. 18, 2016

Tax Tips for Students Working this Summer

IRS Special Edition Tax Tip 2016-11, June 28, 2016

Many students get summer jobs. It’s a great way to earn extra spending money or to save for later. Here are some tips for students with summer jobs:

  1. Withholding and Estimated Tax.If you are an employee, your employer normally withholds taxfrom your paychecks. If you are self-employed, you may be responsible for paying taxes directly to the IRS. One way to do that is by making estimated tax payments on set dates during the year. This is essentially how our pay-as-you-go tax system works.
  2. New Employees. When you get a new job, you need to fill out aForm W-4, Employee’s Withholding Allowance Certificate. Employers use this form to calculate how much federal income tax to withhold from your pay. The IRS Withholding Calculator tool on IRS.gov can help you fill out the form.
  3. Self-Employment.Money you earn working for others is taxable. Some work you do may count as self-employment. These can be jobs like baby-sitting or lawn care. Keep good records of your income and expenses related to your work. You may be able to deduct those costs. A tax deduction generally reduces the taxes you pay.
  4. Tip Income.All tip income is taxable. Keep a daily log to report your tips. You must report $20 or more in cash tips received in any single month to your employer. And you must report all of your yearly tips on your tax return.
  5. Payroll Taxes.You may earn too little from your summer job to owe income tax. But your employer usually must withhold Social Security and Medicare taxes from your pay. If you’re self-employed, you may have to pay them yourself. They count for your coverage under the Social Security system.
  6. Newspaper Carriers.Special rules apply to a newspaper carrier or distributor. If you meet certain conditions, you are self-employed. If you do not meet those conditions, and are under age 18, you may be exempt from Social Security and Medicare taxes.
  7. ROTC Pay.If you’re in ROTC, active duty pay, such as pay you get for summer advanced camp, is taxable. Other allowances you may receive may not be taxable, see Publication 3 for details.

 

 

 

 

  Owe Taxes? These Tips Can Help

The IRS offers many safe and easy ways to pay your taxes. These tips explain many of them:

  • Mailed tax bills. The IRS sends bills in the U. S. mail. Try to pay soon and in full to avoid any extra charges. If you can’t pay in full, you’ll save if you pay as much as you can. The more you can pay the less interest and penalties you will owe for late payment. The IRS offers several payment options on IRS.gov.
  • Use IRS Direct Pay. The best way to pay your taxes is with IRS Direct Pay. It’s the safe, easy and free way to pay from your checking or savings account. You can pay your tax in just five simple steps in one online session. Just click on the “Payment” tab on IRS.gov. You can now use Direct Pay with the IRS2Go mobile app.
  • Get a short-term payment plan. If you owe more tax than you can pay, you may qualify for more time- up to 120 days- to pay in full. You do not have to pay a user fee to set up a short-term full payment agreement. However, the IRS will charge interest and penalties until you pay in full. It’s easy to apply online at IRS.gov. If you have questions about a bill from the IRS, you may call the phone number listed on it.
  • Apply for an installment agreement. Most people who need more time to pay can apply for an Online Payment Agreement on IRS.gov. A direct debit payment plan is the hassle-free way to pay. The setup fee is much less than other plans and you won’t miss a payment. If you can’t apply online, or prefer to do so in writing, use Form 9465, Installment Agreement Request. Individuals can use Direct Pay to make their installment payments. For more about payment plan options, visit IRS.gov.
  • Check out an offer in compromise. An offer in compromise or OIC may let you settle your tax debt for less than the full amount you owe. An OIC may also be helpful if full payment may cause you financial hardship. Not everyone qualifies, however, so make sure you explore all other ways to pay your tax before you submit one to the IRS. Use the OIC Pre-Qualifier tool to see if you qualify.

Avoid tax surprises. If you are an employee, you can avoid a tax bill by having more taxes withheld from your pay. To do this, file a new Form W-4, Employee’s Withholding Allowance Certificate, with your employer. Use the IRS Withholding Calculator tool on IRS.gov to see if you’re having the right amount withheld. If you are self-employed, you may need to make or change your estimated tax payments. See Form 1040-ES