Jo Willetts, EA
Director, Tax Resources
Published on: June 09, 2022
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Warm weather, sunny days, and more daylight can make summer a great time to earn extra money. Summer jobs can range from driving for a rideshare service to working shifts at your local restaurant or retail store. Whether you are a teacher who is off for the summer, a college student looking for extra cash, or someone who just wants some additional income, don’t forget Uncle Sam at tax time.
School’s out so summer can mean big business for teens. Mowing lawns, babysitting, and tutoring are creative ways kids earn extra cash during the season. They may also work part-time as a lifeguard, camp counselor or fast-food server. Whatever they choose, taxes are probably the last thing on their minds. But guess what? Their teen status does not exempt them from paying the IRS. All money earned from summer and part-time jobs must be reported. If you’re the parent of an enterprising teen, make sure they keep good records of what they earn and that they receive their W-2s.
Are you a teacher, or college student? Flex your entrepreneurial muscles this summer. The skills you use in your regular job may be needed by a small business or non-profit on a project basis. Do you build websites, write grant proposals, or conduct trainings? You can use these skills to branch out and do contract work. Driving for a rideshare service like Lyft or renting a room through an online service like Airbnb may also appeal to you.
Self-employment, contract or gig work gives you the freedom to set your own schedule, work at your own pace, and be your own boss. But there is a cost to being the boss – you are considered self-employed which means you pay taxes directly to the IRS. You may receive a 1099-N for any jobs in which you earn $600 or more. If you get paid through a third party like Lyft, you may get a 1099-K when you receive $600 or more. Remember to report all your income, no matter how you were paid, how much you earned, and even if it isn’t reported to you on a Form 1099.
Being the boss has benefits. Self-employed workers can claim a range of business expenses on Schedule C, Profit and Loss for Business to help reduce taxable income. Do you travel to meet with business clients? The cost of vehicle maintenance, transportation, lodging, as well as work equipment like cleaning supplies and uniforms can all be deducted. Make sure you keep good records of both your expenses and earnings for accurate filing.
Businesses often hire additional, temporary staff to serve an influx of customers during the summer season. If you work a few shifts at a restaurant or hotel at the shore or assist stylists at a hair salon, you may get tips from happy customers. Monthly tips over $20 must be reported to your employer and will be reflected in your W-2 in Box 1. Monthly tips less than $20 do not need to be reported to your employer. However, all cash and the value of non-cash tips like tickets and passes must be reported as income on your tax return.
While you work this summer, make sure you keep good records so you are ready for tax time. Take advantage of the summer season to earn a little extra cash and remember to have some fun along the way.
About the Author
Jo Willetts, Director of Tax Resources at Jackson Hewitt, has more than 35 years of experience in the tax industry. As an Enrolled Agent, Jo has attained the highest level of certification for a tax professional. She began her career at Jackson Hewitt as a Tax Pro, working her way up to General Manager of a franchise store. In her current role, Jo provides expert knowledge company-wide to ensure that tax information distributed through all Jackson Hewitt channels is current and accurate.