Now that Memorial Day has passed, many people are thinking more about summer vacations than taxes. But summer is a great time to review withholding and see if your summer plans will affect next year’s tax return. Here are some common summertime tax situations and tips to help you figure out if they apply to your tax situation.
If you’re a newlywed and your name has changed, you should report the change to the Social Security Administration. You should also report any address change to the United States Postal Service, your employer, and the IRS. To report a change of address for federal tax purposes, complete Form 8822, Change of Address, and submit it to the IRS. This will help make sure you receive the documents you will need to file your taxes.
Sending kids to summer day camp
Unlike overnight camps, the cost of summer day camp may count towards the child and dependent care credit.
Summertime and part-time workers may not earn enough to owe federal income tax, but they should still remember to file a return. They’ll need to file early next year to get a refund for taxes withheld from their checks this year.
Gig economy work
You may find it convenient to earn summer income by providing on-demand work, often through an online platform like an app or website. Examples include ride sharing, delivery services and other activities. If this sounds like you, be aware that you may be categorized as either an employee or an independent contractor, depending on the nature of your work.
Normally, employees receive a Form W-2 from their employer to account for the summer’s work. They then use this to prepare their tax return. If you are categorized as an employee, you should receive your W-2 by January 31 next year. Employees will get a W-2 even if they no longer work for the summertime employer.
Independent contractors, on the other hand, won’t receive a W-2 for their work, and aren’t subject to withholding. This makes them responsible for paying their own income taxes plus Social Security and Medicare taxes.
Adjust your withholding now to avoid tax surprises next year
You can avoid a tax surprise next filing season by reviewing your withholding now. Life events like marriage, divorce, having a child, or a change in income can all affect taxes. If you contact our office, we can help you assess your situation and determine whether you need to change your withholding by submitting a new Form W-4 to your employer.
This article carries no official authority, and its contents should not be acted upon without professional advice. For more information about this topic, please contact our office.