How Taxes Work for Your First Summer Job

You got a summer job. Congrats. Now there's a small mountain of tax stuff you'll bump into — and most of it sounds way scarier than it actually is. Let's walk through it in plain English so nothing surprises you.

The basics: yes, you owe taxes

Here's the truth most teens don't know: even if you only work for two months, the IRS still considers you a worker who owes taxes. Your employer will take some out of your paycheck automatically. You may also need to file a tax return next year. The IRS Tips for Students page is the simplest official resource.

The W-4: the form you fill out before day 1

Before you start working, you'll fill out a Form W-4. It tells your employer how much tax to take out of each paycheck.

If you fill it out wrong, two things can happen:

• Too much tax taken out — your paychecks are smaller, but you'll get a refund next year.
• Too little tax taken out — your paychecks are bigger, but you may owe money next year.

Most teens working a summer job earn under the federal income tax filing threshold and can write "exempt" on the W-4 — but only if you didn't owe federal tax last year and won't this year. If you're not sure, ask a parent or the person who hired you. This is a place where a 5-minute conversation saves you headaches later.

The IRS Form W-4 page has the full instructions.

What gets taken out of your check

Your gross pay (the amount before anything is removed) gets reduced by:

• Federal income tax — for the U.S. government
• State income tax — only in some states (Florida, Texas, Washington and a few others have none)
• Social Security tax — 6.2% of your pay, helps fund retirement and disability for older Americans
• Medicare tax — 1.45% of your pay, helps fund health care for seniors

Together, Social Security and Medicare are called FICA taxes. The SSA explains the program here.

For example: $500 in gross pay - about $38 in FICA - some federal income tax = your net pay (what actually hits your account).

The W-2: what you get at the end of the job

When the year ends (or your job ends), your employer sends you a W-2. It's a one-page document showing:

• How much you earned
• How much tax was taken out
• A few other small numbers

Save it. You'll need it to file your tax return. If you lost it, ask your old employer for a copy.

Do I have to file a tax return?

It depends on how much you earned. The IRS sets a yearly filing threshold — for most teens working a summer job, you might be under it and not be required to file.

But here's the thing: if your employer withheld federal income tax from your paycheck and you don't file, you don't get that money back. A return takes 30 minutes to do online and you usually get a refund.

The IRS Free File program lets people under a certain income file federal taxes for free. For more on that, see our first job article.

What about tips?

If you wait tables, drive deliveries, or anything where customers tip — the IRS expects you to report all tips, including cash. Your employer will help you track this on your paystub. Underreporting tips is technically tax fraud and you really don't want that on your record at 17.

What about babysitting, lawn care, or other under-the-table work?

If you're paid in cash and not on an employer's payroll, you're considered self-employed. There's no W-2. The rules are a bit different and the threshold for filing is much lower (around $400 in self-employment income, though check current IRS rules).

If you earn a lot from self-employed work, you may also owe self-employment tax — an extra 15.3% to cover Social Security and Medicare for yourself. The IRS self-employed page has details.

State taxes

States have their own rules and forms. Some states have no income tax. Others have rates from 1% to 13%. Check your state's tax website. The USA.gov state taxes page links to all of them.

What to do with your refund (if you get one)

If you do get a federal refund, it's not "free money." It's money the government held onto from your paychecks all year. You're getting back what was already yours.

A simple plan:

• Save half in your savings account
• Spend half on something you actually want

For more on saving, see our saving goals page or our budget guide.

Words to know

• W-4 — the form you fill out for your employer before starting work
• W-2 — the form your employer gives you in January showing what you earned
• Withholding — money taken out of your paycheck for taxes
• FICA — Social Security + Medicare taxes
• Refund — money you get back if too much was withheld

For more like this, see the Learn hub or check the glossary.

If you're not sure about anything in this article, ask a trusted adult — that's what they're there for.