Latest Newsletter Edition
Summer Tax Reminder
Students and other people who earn summer income, including gig economy and other self-employment income, should prepare for potential federal tax obligations.
They may normally have taxes withheld from their paychecks by their employer after filling out a Form W-4. However, if the job is regarded as self-employment, like baby-sitting or lawn care can be, they should keep good records of all expenses to help maximize potential deductions.
In the case of lawn care, potential deductible expenses may include business cards, fliers, fuel, equipment rentals, chemicals, work mileage, etc.
In addition, minors and young adults with self-employment earnings (including gig economy income) of at least $400 must file a federal tax return and may owe self-employment tax in addition to federal income tax.
Americans of all ages with summer income from self-employment may also need to pay estimated tax on a quarterly basis in order to avoid IRS penalties. Alternatively, if you have self-employment earnings but also work as an employee, the IRS Withholding Estimator tool (link below) can help you determine the correct withholding amount to cover your income and self-employment tax responsibilities.
IRS Withholding Estimator: https://www.irs.gov/individuals/tax-withholding-estimator
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