It’s Summertime! Tips For Students Making Taxes Easy For Students With Jobs.
With summer here, many students will turn their attention to making money from a summer job. Whether it’s flipping burgers or filing documents, student workers need to know some facts about their summer jobs and taxes. For students working as employees, not all the money they will earn will make it to their pocket because employers must withhold taxes from their paycheck.
Here are some tax tips students should know when starting a summer job.
New employees: Employees – including those who are students – normally have taxes withheld from their paychecks by their employer. When anyone 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 new employee’s pay. The Withholding Calculator on IRS.gov can help a taxpayer fill out this form.
Self-employment: Students who do odd jobs over the summer to make extra cash are self-employed. This include jobs like baby-sitting or lawn care. Money earned from self-employment is taxable, and self-employed workers may be responsible for paying taxes directly to the IRS. One way they can do this is by making estimated tax payments during the year.
Tip income: Students working as waiters or camp counselors who earn tips as part of their summer income should know tip income is taxable. They should keep a daily log to accurately report tips. They must report cash tips to their employer for any month that totals $20 or more.
Payroll taxes: This tax pays for benefits under the Social Security system. While students may earn too little from their summer job to owe income tax, employers usually must still withhold Social Security and Medicare taxes from their pay. If a student is self-employed, Social Security and Medicare taxes may still be due and are generally paid by the student.
Reserve Officers’ Training Corps pay: If a student is in an ROTC program, and receives pay for activities such as summer advanced camp, it is taxable. Other allowances the student may receive – like food and lodging – may not be taxable. The Armed Forces’ Tax Guide on IRS.gov provides details.
Importance To Preserve Records
Keep in mind that the IRS has up to three years to select a tax return for audit. The California Franchise Tax Board has up to four years to select a California State Income Tax Return for audit. In some cases this period is extended to six years. When a taxpayer is selected for audit, the taxpayer has the burden of proof to show that expenses claimed are properly deductible. Having the evidence handy and organized makes meeting this burden of proof much easier.
Essential Records to Have for a Tax Audit
If you are getting ready for a tax audit, one of the most important things to do is gather and organize your tax records and receipts. There’s a good chance that you have a large amount of documents and receipts in your possession. No matter how organized you are, it can be a daunting task to collect the right pieces and make sure that you have them organized and handy for the audit conference.
We have seen many tax audits that hinge on whether or not the taxpayer can provide proper documentation for their previous tax filings. A tax lawyer in Orange County or elsewhere can make sure that the documentation is complete and proper. By submitting this to your tax attorney in advance of the audit, your tax attorney can review your documentation and determine if there are any gaps that need to be addressed before starting the dialogue with the IRS agent.
So what are the most essential tax records to have ahead of your audit? Here are a few must-have items:
- Any W-2 forms from the previous year. This can include documents from full-time and part-time work, large casino and lottery winnings and more.
- Form 1098 records from your bank or lender on mortgage interest paid from the previous year.
- Records of any miscellaneous money you earned and reported to the IRS including work done as an independent contractor or freelancer, interest from savings accounts and stock dividends.
- Written letters from charities confirming your monetary donations from the previous year.
- Receipts for business expenses you claimed.
- Mileage Logs for business use of vehicle.
- Entertainment and Travel Logs for business activities.
What Should You Do?
You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), the San Francisco Bay Area (including San Jose and Walnut Creek) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. If you are involved in cannabis, check out what our cannabis tax attorney can do for you.