The Internal Revenue Service passes along these reminders that how you spend your summer can affect your taxes.
"Enjoy the summer, but be careful not to miss out on tax breaks and address any tax issues now," said Pennsylvania IRS spokesman David Stewart.
A summer day camp program for children younger than 13 can be the source of a tax credit. Even a sitter at your home for a child younger than 13 can give a tax benefit. Check out IRS Publication 503, "Child and Dependent Care Expenses," available at the IRS.gov Web site or by calling the IRS at 1-800-829-3676 (1-800-TAX-FORM).
Summer workers sometimes are misclassified as independent contractors (self-employed) rather than as employees. Employers who do this usually fail to withhold taxes from the worker's wages, often leaving the worker responsible at tax time for paying income taxes plus Social Security and Medicare taxes. Workers can avoid higher tax bills and lost benefits if they know their proper status.
Tips for Working Students
You may be exempt from withholding if:
You can be claimed as a dependent (usually on a parent's return);
Your total 2009 income will not be over $5,700;
Your unearned income (interest, dividends, etc.) will not exceed $300; and,
You had no income tax owed for 2008.
You'll still have to pay Social Security and Medicare taxes, but skipping unnecessary income tax withholding will put more money in your pocket now. Read Form W-4 carefully before filling it out for your employer.