Students

If you are lucky enough to have a part-time job this summer, you’ll most likely be asked to complete a W-4 form so your employer can determine how much income tax to withhold from your paycheck.  The form is easy, it’s the worksheets that go with it that are complicated.

Here’s a tip: for 2019, the standard deduction has increased to $12,200. If you do not expect to make that much income in 2019, go to Line 7 on the W-4 and write the word EXEMPT.  Your employer will not withhold any income taxes which is appropriate because you will not owe any income taxes.  Your share of payroll taxes will still be withheld, and those are not refundable.

If you do expect you will have more than $12,200 in income from all sources in 2019, you will want to complete the worksheets on the W-4 to determine the correct amount of withholding.

Please do not consider this to be tax advice, it is for informational purposes only. For tax advice, consult a professional tax advisor.

One final tip:  if you can manage it, you can open a Roth IRA to deposit some of your tax-free earnings.  The benefit is that those contributions will grow without being taxed if you wait until age 59 1/2 to make withdrawals.  It’s the best deal going!

That covers income taxes, but what about the FAFSA? Students are allowed to earn a certain amount without any impact to the family’s EFC. The amount for 2019 income is $6,660. Student income above that amount is assessed at 50% in the EFC formula. (However, remember that your 2019 income will not be used until the 2019-20 version of the FAFSA, which determines aid for the 2020-21 school year.)