Get Ready for Taxes: Plan Ahead to Avoid Refund Delays
Friday, December 1, 2017
As the holiday shopping season approaches, it's a great time for some reminders if you're planning to take on some seasonal temp work!
Seasonal employees are workers who take jobs that only last for a few weeks or a couple of months during a specific season. Most commonly, these employees are hired on to give a business additional help during a busy period such as the summer season or the retail holiday season. In many cases, seasonal employees are students who work during school breaks or adults who are supplementing their full-time pay with part-time work. No matter their individual situations, it's important for seasonal employees to understand their tax implications so that they can avoid paying tax penalties with their returns.
1. Record your tips.
Are you employed in a service profession where you receive compensation through tips? If so, you might think that those tips are exempt from taxation--they're not. The IRS requires you to report all of your tips as part of your gross income for the year. Since your employer might not provide you with an accurate report of your tips at year's end, keep up with them yourself by using a spreadsheet or a financial diary.
2. Watch out for self-employment taxes.
According to the IRS, anyone who operates a business on his or her own is self-employed. This can include simple jobs like babysitting, lawn care, or any job that classifies you as an independent contractor. The federal tax law stipulates that all taxpayers who receive $400 or more in self-employment earnings during the year must pay self-employment taxes. If you fall into this category of worker, calculate your taxes by using Schedule SE and submit it with your return.
3. Find out if you're exempt from income tax.
In some cases, seasonal employees may not have to pay income tax. This exemption applies to those who earn less than the total of their personal exemption and the standard deduction for their filing status. To make sure that you're truly exempt, contact a qualified tax professional. If you don’t have to pay, you can designate this on your W-4 form and avoid having federal income tax withheld from your pay.
4. Cover your tax liability.
If you're planning on working more than one seasonal job at a time, you may end up paying more income tax than you think. The IRS will require you to include the income from all of those jobs in your gross income for the year, which could significantly increase your tax liability. To make sure you're covered, have each employer deduct the appropriate tax withholding for your filing status and allowance amount.
5. Prepare yourself for tax withholding.
Many employees are surprised to find out exactly how much money the government withholds for tax purposes. Along with federal income taxes, you'll have to pay state income taxes, Social Security and Medicare (FICA) taxes, and in some cases, you may even have to pay local income tax as well. Take the time to examine the deductions from your first paycheck so that you can estimate how much you can expect to take home each week.
Seasonal employees have to face some unique tax situations. By using these tips for seasonal workers, you can get the most out of your part-time pay.
By Top Tax Defenders