Summer Jobs and Taxes
If you are lucky enough to have a part-time job this summer, you’ll most likely be asked to complete a W-4 form so your employer can determine how much income tax to withhold from your paycheck. The form is easy, it’s the worksheets that go with it that are complicated. Here’s a tip: if you do not expect to make more than $6,300 (the 2015 standard deduction) in income in 2016, go to Line 7 on the W-4 and write the word EXEMPT. Your employer will not withhold any income taxes, which is appropriate because you will not owe any income taxes. Your share of payroll taxes will still be withheld, and those are not refundable.
If you do expect you will have more than $6,300 in income in 2016, you will want to complete the worksheets on the W-4 to determine the correct amount of withholding.
Please do not consider this to be tax advice, it is for informational purposes only. For tax advice, consult a professional tax advisor.
One final tip: if you can manage it, you can open a Roth IRA to deposit some of your tax-free earnings. The benefit is that those contributions will grow without being taxed if you wait until age 59 1/2 to make withdrawals. It’s the best deal going!
By the way, if you might make something close to $6,300, you want to consider the impact your earnings will have on your Expected Family Contribution. Student income is assessed at 50%! Contact us today if this applies to you.