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It’s that time of the year again for seasonal work and summer jobs. The IRS is providing the small business and self-employed community some helpful tips to work now and avoid tax issues later: Worker classification matters. Business owners must determine whether summer workers are employees or independent contractors. Independent contractors are not subject to withholding, making them responsible for paying their own income taxes plus Social Security and Medicare taxes. Workers can avoid higher tax bills and lost benefits if they know their proper status. Summer workers may be exempt from tax withholding. Workers may not earn enough from summer jobs to owe income tax, but employers usually must withhold Social Security and Medicare taxes from pay. If self-employed or an independent contractor, workers need to pay their own Social Security and Medicare taxes, even if they have no income tax liability. The Form W-2 shows the amount of earnings and withholdings for state and federal taxes, Social Security, Medicare wages and tips. Check withholding. For those who work a seasonal or part-year job, checking withholding now can help make sure employers withhold the right amount of tax. The Withholding Calculator on IRS.gov helps employees determine whether they need to submit a new Form W-4 to their employer. It estimates income, credits, adjustments and deductions for most financial situations. Employees can use their results from the calculator to fill out the form and adjust their income tax withholding. They must give their updated forms to their employers to take effect. For details about any of these topics, visit IRS.gov/GetReady. |