Although the tax return filing deadline has come and gone, it’s never too early to start planning for next year’s tax return. With that in mind, let’s take a look at some common summertime situations that could affect your taxes:
Getting married. Getting married this summer? Be sure to report any name changes to the Social Security Administration (SSA). Taxpayers should also report address changes to the United States Postal Service, employers, and the IRS. To report a change of address for federal tax purposes, taxpayers must complete Form 8822, Change of Address and submit it to the IRS. This will help make sure they receive the documents they will need to file their taxes.
Sending kids to summer day camp. The cost of sending your children to a summer day camp may count towards the child and dependent care credit (see above for more details on this credit). Overnight camps do not qualify, however.
Working part-time. While summertime and part-time workers may not earn enough to owe federal income tax, they should 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. Summer income earned by providing on-demand work, services, or goods, often through a digital platform like an app or website, is taxable income. Examples of gig work include ride-sharing, delivery services, and other activities. Please call the office to learn more about how participating in the gig economy can affect taxes.
Typically, employees receive a Form W-2, Wage and Tax Statement, from their employer to account for the summer’s work. Taxpayers use this information when filing their tax returns, and they should receive the W-2 by January 31 next year. Employees will get a W-2 even if they no longer work for the summertime employer.
Keep in mind that employers determine whether the people who work for them are employees or independent contractors. Independent contractors aren’t subject to withholding, making them responsible for paying their own income taxes plus Social Security and Medicare taxes.
Adjust Withholding Now To Avoid Tax Surprises Next Year
Life events like marriage, divorce, having a child, or a change in income can affect taxes. Taxpayers should remember that, if needed, they should submit their new W-4 to their employer, not the IRS. Taxpayers can avoid a tax surprise next filing season by using the IRS Tax Withholding Estimator to assess their income tax, credits, adjustments, and deductions. The tool helps taxpayers determine whether they need to change their withholding by submitting a new Form W-4, Employee’s Withholding Allowance Certificate.
Please contact the office if you have any questions or concerns about this topic. Help is just a phone call or email away.