Getting the Most Out of a Summer Job Paycheck

Kids working this summer may be paying more taxes than necessary. Day to Day personal finance contributor Michelle Singletary joins Alex Chadwick to discuss how to get the most out of a summer job paycheck.

CHADWICK: This is DAY TO DAY from NPR News. Hey kids, maybe you're lucky enough to have a summer job. You're bringing in money, but you're also paying taxes. And look closely at that pay stub says personal finance expert Michelle Singletary, regular contributor to DAY TO DAY. and joining us again now. Michelle, welcome back. And what about summer workers? Young people get summer jobs - teens and college students. What do they need to do about that pay stub and taxes?

Ms. MICHELLE SINGLETARY (Finance expert): Well, you know, all of us know that we have to fill out our W-4 form to have taxes withheld. But if you are a student or a teenager, and you're not going to be earning a lot and you're going to be getting that money back, you actually can fill out the W-4 form so that you won't have your taxes withheld. Now there's some hurdles you have to jump through, like if you are being claimed by someone else, that you won't have any unearned income that exceeds $300. So that's like dividend income, or income from retirement plan, but if you're teen that's probably not going to happen.

(Soundbite of laughter)

Ms. SINGLETARY: Or, if you're going earn less than about $5,150, and all of this - I know people are wondering, okay, my head is spinning. But just go to the IRS Web site, IRS.gov, and put in publication 505. Look on page 12 and it lays it out. But there's no reason for them to have taxes taken out, and then have to file taxes to get it back. So fill it out correctly now, the W-4 form, so that you can get that money now.

CHADWICK: That's a great tip. That's going be more money in your pocket. Hey, speaking of tips. What about tips? You know, waiters, waitresses, a lot of people get tips. What about reporting that income?

Ms. SINGLETARY: Those tips are taxable.

(Soundbite of laughter)

Ms. SINGLETARY: You know, people getting paid under the table, but we all know that that is illegal. You're supposed to report all of your taxable income, and tips are taxable.

CHADWICK: How about this: suppose you're a kid and you are - you're going to go some place else and get a job for the summer. Would the cost of getting to that place - like maybe being a camp counselor or something like that - would that be tax deductible?

Ms. SINGLETARY: Well, what's tax deductible is if you put your kid in a summer camp, that may count as an expense towards your child and dependant care credit. And you can claim that credit if you put your kid in a day camp. That's not overnight camp, but a day camp. So you want to - you know, it's just like when you go to work during the regular school season, and you have to put them in before or after care that will allow you to work, and that can be deductible - the same thing with summer camp.

CHADWICK: Oh, well that's a good thing to know.

Ms. SINGLETARY: Mm hmm.

CHADWICK: And what about that, though? Suppose you have a kid who's going off to be a camp counselor, could that child deduct from their income - could they deduct the cost of getting to the camp for the summer? You know, you take a plane or a bus or something and...

Ms. SINGLETARY: Right. No, not necessarily. No. You can...

CHADWICK: You can't?

Ms. SINGLETARY: No. That's just a job, and just like we can't deduct when we drive to our regular jobs, you would not be able to deduct that. Now, obviously, we go back to where we talked before about making sure they fill out their W-4 form correctly. But the cost of going to and from work is not typically deductible for anybody.

CHADWICK: Michelle Singletary writes the syndicated column the Color of Money. She's also our regular guest for discussions of personal finance. Michelle, thank you.

Ms. SINGLETARY: You're so welcome.

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