Now that the calendar has turned to June, we have reached the time when many people start to pick up some part-time work in the form of a summer job. The timings leads students (and even some teachers) to seek new positions in the work force, even if just for two to three months. This can feel so small that it is easy to overlook some longer ramifications, but it is good to keep in mind that wages earned in that time will, in all likelihood, end up being taxed.
So as a first note, it can be worth using the IRS’s withholding calculator to make sure enough taxes are being taken out of these paychecks to ensure a surprise doesn’t come at tax filing time. Granted, some of these jobs won’t even result in making enough money to need to pay taxes, but it is better to have confidence in that than just guessing it will be the case.
And for those who are picking up extra work at this time of year in addition to some larger wages being earned elsewhere in other months, that is a situation where you want to know if you should be having some extra money taken out of your check for tax obligations.
Some will turn to the growing gig economy for their summer work, and a little extra vigilance can be food for those not getting a traditional paycheck. If no taxes are coming out of the money you earn, and you receive a 1099 on it early next year, the IRS is going to know about it, and expect you to pay. Again, the calculator can let you take a good guess at what your obligation will be, so you can set aside enough money to pay the eventual bill, or make some estimated tax payments during the year.
As always, we are happy to work with anyone who has questions on how certain events will change your tax picture, even if they are small ones like this. Having power helps you make the right decisions, and the right decisions can’t always be reached by worrying about your tax situation once a year when it comes time to file.
And a final note on this to my business customers – if you can, give someone one of those summer jobs. Trust me, I personally know that running a small business can leave you feeling a little ragged, and wouldn’t a little help be nice? While running that ragged, we can lose track of the fact that in all that work we have picked up knowledge and skills that can be passed on. Wouldn’t doing that while getting that influx of some extra help be a nice thing?
Taking on new employees can be daunting (Can I afford it? Will I find the right person?), but this temporary setup can shrink the size of some of those questions, and give you a chance to be a short-time mentor for someone who could really use it, and bring what they learn into their future. Beyond that, it will bring new eyes to your operation, for this type of relationship works best when the learning goes both ways.
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To ensure we don't make the folks at the IRS ornery, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.