Many students take a job in the summer after school lets out. If it’s your first job it gives you a chance to learn about the working world. That includes taxes we pay to support the place where we live, our state and our nation. Here are eight things that students who take a summer job should know about taxes:

1. Don’t be surprised when your employer withholds taxes from your paychecks. That’s how you pay your taxes when you’re an employee. If you’re self-employed, you may have to pay estimated taxes directly to the IRS on certain dates during the year. This is how our pay-as-you-go tax system works.

2. As a new employee, you’ll need to fill out a Form W-4, Employee’s Withholding Allowance Certificate. Your employer will use it to figure how much federal income tax to withhold from your pay. The IRS Withholding Calculatortool on IRS.gov can help you fill out the form.

3. Keep in mind that all tip income is taxable. If you get tips, you must keep a daily log so you can report them. You must report $20 or more in cash tips in any one month to your employer. And you must report all of your yearly tips on your tax return.

4. Money you earn doing work for others is taxable. Some work you do may count as self-employment. This can include jobs like baby-sitting and lawn mowing. Keep good records of expenses related to your work. You may be able to deduct (subtract) those costs from your income on your tax return. A deduction may help lower your taxes.

5. If you’re in ROTC, your active duty pay, such as pay you get for summer camp, is taxable. A subsistence allowance you get while in advanced training isn’t taxable.

6. You may not earn enough from your summer job to owe income tax. But your employer usually must withhold Social Security and Medicare taxes from your pay. If you’re self-employed, you may have to pay them yourself. They count toward your coverage under the Social Security system.

7. If you’re a newspaper carrier or distributor, special rules apply. If you meet certain conditions, you’re considered self-employed. If you don’t meet those conditions and are under age 18, you are usually exempt from Social Security and Medicare taxes.

8. You may not earn enough money from your summer job to be required to file a tax return. Even if that’s true, you may still want to file. For example, if your employer withheld income tax from your pay, you’ll have to file a return to get your taxes refunded. You can prepare and e-file your tax return for free usingIRS Free File. It’s available exclusively on IRS.gov.

The Eleventh Circuit Court of Appeals upheld a deficiency notice of more than $5 million against a taxpayer who reported adjusted gross income of $22,921 and taxable income of $13,221 on his late-filed 2006 return (Hoang, No. 13-14398 (11th Cir. 5/2/14), aff’g T.C. Memo. 2013-127).

Diep Hoang’s 2006 tax return was due Oct. 15, 2007, but he did not file it until Sept. 2, 2009, and the IRS was suspicious of the low income reported on the return because it had received Forms 1099 from various brokerage firms indicating he received $14,855,797 from securities sales in 2006. In response, the IRS issued a notice of deficiency for 2006 for $5,188,587 in income tax, an addition to tax of $1,297,534 for failure to timely file, and an understatement penalty of $1,037,717. The IRS treated the total amount reported on the 1099s from the sale of the securities as capital gain because it did not have any information about the basis of the stock that was sold.

In response to the IRS’s notice of deficiency, Hoang filed a petition with the Tax Court claiming that the notice was “totally invalid and illegal” because the IRS was not authorized under the Code to issue the notice, the tax increase was fabricated, the IRS did not meet its burden of proving the legality of the notice, and the IRS was issuing the notice to retaliate for Hoang’s earlier claim that it had committed perjury in a prior controversy with Hoang. Hoang also tried to file a counterclaim arguing that the notice was a criminal act disguised as tax collection and asking for $75 million in damages from the IRS.

While preparing for the Tax Court trial, the IRS tried many times to get cost basis information from Hoang but was unsuccessful. With its first request, the IRS provided a listing of each sale and its amount and date; Hoang responded by saying the request was unconstitutional. In response to the second request, Hoang responded that the IRS lacked jurisdiction because the notice was issued on Aug. 3, 2010, which, he claimed, was after the statute of limitation had run on his 2006 return. Hoang also claimed there were no more documents to provide because “all of them were discarded after April 15, 2010.” 

During the trial, the IRS again tried to get the cost basis information. In one response, Hoang claimed he provided it when he filed his return, but the IRS threw it away. He also tried to submit a 13-page exhibit that was a compendium of various papers, including a document purportedly from his broker that did not identify the account holder. The Tax Court refused to admit the exhibit into evidence because the documents in it appeared to be incomplete and altered, they had not been authenticated, and they had not been provided before trial.

In 2013, the Tax Court issued a 48-page memorandum detailing all of these facts and upheld the IRS’s notice of deficiency in full. The Eleventh Circuit affirmed the Tax Court’s decision, finding that the statute of limitation had not run on Hoang’s return because he did not file it until 2009, and that the deficiency was correct because Hoang failed to provide any cost basis information despite numerous opportunities to do so. All IRS determinations have a presumption of correctness that taxpayers can rebut, but, in this case, the taxpayer presented no evidence that would rebut that presumption.

Starting in tax year 2013, people with home-based businesses can choose a new simplified option for figuring the deduction for business use of a home, commonly referred to as the home office deduction. The new optional deduction, capped at $1,500 per year based on $5 a square foot for up to 300 square feet, will reduce the paperwork and recordkeeping burden on small businesses by an estimated 1.6 million hours annually.

Normally, home-based businesses are required to fill out a 43-line form (Form 8829) often with complex calculations of allocated expenses, depreciation and carryovers of unused deductions. Instead, taxpayers claiming the optional deduction need only complete a short worksheet in the tax instructions and enter the result on their return.

Self-employed individuals claim the home office deduction on Schedule C Line 30, farmers claim it on Schedule F Line 32 and eligible employees claim it on Schedule A Line 21.

Though homeowners using the new option cannot depreciate the portion of their home used in a trade or business, they can claim allowable mortgage interest, real estate taxes and casualty losses on the home as itemized deductions on Schedule A. These deductions need not be allocated between personal and business use, as is required under the regular method.

Business expenses unrelated to the home, such as advertising, supplies and wages paid to employees, are still fully deductible. Long-standing restrictions on the home office deduction, such as the requirement that a home office be used regularly and exclusively for business and the limit tied to the income derived from the particular business, still apply under the new option.

Further details on the home office deduction and the new option can be found in IRS Publication 587.

Most people stop thinking about taxes after they file their tax return. But there’s no better time to start tax planning than right now. And it’s never too early to set up a smart recordkeeping system. Here are six IRS tips to help you start to plan for this year’s taxes:

1. Take action when life changes occur.  Some life events, like a change in marital status, the birth of a child or buying a home, can change the amount of taxes you owe. When such events occur during the year, you may need to change the amount of tax taken out of your pay. To do that, you must file a new Form W-4, Employee’s Withholding Allowance Certificate, with your employer. Use the IRS Withholding Calculator on IRS.gov to help you fill out the form. If you receive advance payments of the premium tax credit it is important that you reportchanges in circumstances, such as changes in your income or family size, to your Health Insurance Marketplace.

2. Keep records safe.  Put your 2013 tax return and supporting recordsin a safe place. That way if you ever need to refer to your return, you’ll know where to find it. For example, you may need a copy of your return if you apply for a home loan or financial aid. You can also use it as a guide when you do next year’s tax return.

3. Stay organized.  Make sure your family puts tax records in the same place during the year. This will avoid a search for misplaced records come tax time next year.

4. Shop for a tax preparer.  If you want to hire a tax preparer to help you with tax planning, start your search now. Choose a tax preparer wisely. You are responsible for the accuracy of your tax return no matter who prepares it. Find tips for choosing a preparer at IRS.gov.

5. Think about itemizing.  If you usually claim a standard deduction on your tax return, you may be able to lower your taxes if you itemize deductions instead. A donation to charity could mean some tax savings. See the instructions for Schedule A, Itemized Deductions, for a list of deductions.

6. Keep up with changes.  Subscribe to IRS Tax Tips to get emails about tax law changes, how to save money and much more. You can also get Tips on IRS.gov or IRS2Go, the IRS’s mobile app. The IRS issues tips each weekday in the tax filing season and three days a week in summer.

Remember, a little planning now can pay off big at tax time next year.

April 15 was the tax day deadline for most people. If you’re due a refund there’s no penalty if you file a late tax return. But if you owe taxes and you fail to file and pay on time, you’ll usually owe interest and penalties on the taxes you pay late. Here are eight facts that you should know about these penalties.

1. If you file late and owe federal taxes, two penalties may apply. The first is a failure-to-file penalty for late filing. The second is a failure-to-pay penalty for paying late.

2. The failure-to-file penalty is usually much more than the failure-to-pay penalty. In most cases, it’s 10 times more, so if you can’t pay what you owe by the due date, you should still file your tax return on time and pay as much as you can. You should try other options to pay, such as getting a loan or paying by credit card. The IRS will work with you to help you resolve your tax debt. Most people can set up a payment plan with the IRS using the Online Payment Agreement tool on IRS.gov.

3. The failure-to-file penalty is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. It will not exceed 25 percent of your unpaid taxes.

4. If you file your return more than 60 days after the due date or extended due date, the minimum penalty for late filing is the smaller of $135 or 100 percent of the unpaid tax.

5. The failure-to-pay penalty is generally 0.5 percent per month of your unpaid taxes. It applies for each month or part of a month your taxes remain unpaid and starts accruing the day after taxes are due. It can build up to as much as 25 percent of your unpaid taxes.

6. If the 5 percent failure-to-file penalty and the 0.5 percent failure-to-pay penalty both apply in any month, the maximum penalty amount charged for that month is 5 percent.

7. If you requested an extension of time to file your income tax return by the tax due date and paid at least 90 percent of the taxes you owe, you may not face a failure-to-pay penalty. However, you must pay the remaining balance by the extended due date. You will owe interest on any taxes you pay after the April 15 due date.

8. You will not have to pay a failure-to-file or failure-to-pay penalty if you can show reasonable cause for not filing or paying on time.

The April 15 tax deadline is approaching. What happens if you can’t get your taxes done by the due date? If you need more time, you can get an automatic six-month extension from the IRS. You don’t have to explain why you’re asking for more time. Here are five important things to know about filing an extension:

1. File on time even if you can’t pay.  If you complete your tax return but can’t pay the taxes you owe, do not request an extension. Instead, file your return on time and pay as much as you can. That way you will avoid the late filing penalty, which is higher than the penalty for not paying all of the taxes you owe on time. Plus, you do have payment options. Apply for a payment plan using the Online Payment Agreement tool on IRS.gov. You can also file Form 9465, Installment Agreement Request, with your tax return. If you are unable to make payments because of a financial hardship, the IRS will work with you.

2. Extra time to file is not extra time to pay.  An extension to file will give you six more months to file your taxes, until Oct. 15. It does not give you extra time to pay your taxes. You still must estimate and pay what you owe by April 15. You will be charged interest on any amount not paid by the deadline. You may also owe a penalty for not paying on time.

3. Use Form 4868.  You can also request an extension by mailing a Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. You must submit this form to the IRS by April 15. Form 4868 is available on IRS.gov.

You don’t need to submit a paper Form 4868 if you make a payment using an IRS electronic payment option. The IRS will automatically process your extension when you pay electronically. You can pay online or by phone.

4. Electronic funds withdrawal.  If you e-file an extension request, you can also pay any balance due by authorizing an electronic funds withdrawal from your checking or savings account. To do this you will need your bank routing and account numbers.

Visit IRS.gov for more information about filing an extension and the many options you have to pay your taxes.

If you find you owe more than you can pay with your tax return, don’t panic. Make sure to file on time. That way you won’t have a penalty for filing late.

Here is what to do if you can’t pay all your taxes by the due date.

1. File on time and pay as much as you can.  File on time to avoid a late filing penalty. Pay as much as you can to reduce interest charges and a late payment penalty. You can pay online, by phone, or by check or money order. Visit IRS.gov for electronic payment options.

2. Get a loan or use a credit card to pay your tax. The interest and fees charged by a bank or credit card company may be less than IRS interest and penalties. For credit card options, see IRS.gov.

3. Use the Online Payment Agreement tool.  You don’t need to wait for IRS to send you a bill before you ask for a payment plan. The best way is to use the Online Payment Agreement tool on IRS.gov. You can also file Form 9465, Installment Agreement Request, with your tax return. You can even set up a direct debit agreement. With this type of payment plan, you won’t have to write a check and mail it on time each month. It also means you won’t miss payments that could lead to more penalties.

4. Don’t ignore a tax bill.  If you get a bill, don’t ignore it.  The IRS may take collection action if you ignore the bill. Contact the IRS right away to talk about your options. If you are suffering a financial hardship, the IRS will work with you.

In short, remember to file on time. Pay as much as you can by the tax deadline and pay the rest as soon as you can. Find out more about the IRS collection process on IRS.gov. Also check out IRSVideos.gov/OweTaxes.

If you don’t have taxes withheld from your pay, or you don’t have enough tax withheld, then you may need to make estimated tax payments. If you’re self-employed you normally have to pay your taxes this way.

Here are six tips you should know about estimated taxes:

1. You should pay estimated taxes in 2014 if you expect to owe $1,000 or more when you file your federal tax return. Special rules apply to farmers and fishermen.

2. Estimate the amount of income you expect to receive for the year to determine the amount of taxes you may owe. Make sure that you take into account any tax deductions and credits that you will be eligible to claim. Life changes during the year, such as a change in marital status or the birth of a child, can affect your taxes.

3. You normally make estimated tax payments four times a year. The dates that apply to most people are April 15, June 16 and Sept. 15 in 2014, and Jan. 15, 2015.

4. You may pay online or by phone. You may also pay by check or money order, or by credit or debit card. If you mail your payments to the IRS, use the payment vouchers that come with Form 1040-ES, Estimated Tax for Individuals.

5. Check out the electronic payment options on IRS.gov. The Electronic Filing Tax Payment System is a free and easy way to make your payments electronically.

6. Use Form 1040-ES and its instructions to figure your estimated taxes.

You may be able to reduce your taxes if you made certain energy-efficient home improvements last year. Here are some key facts that you should know about home energy tax credits.

Non-Business Energy Property Credit

• This credit is worth 10 percent of the cost of certain qualified energy-saving items you added to your main home last year. This includes items such as insulation, windows, doors and roofs.
• You may also be able to claim the credit for the actual cost of certain property. This may include items such as water heaters and heating and air conditioning systems. Each type of property has a different dollar limit.
• This credit has a maximum lifetime limit of $500. You may only use $200 of this limit for windows.
• Your main home must be located in the U.S. to qualify for the credit.
• Be sure you have the written certification from the manufacturer that their product qualifies for this tax credit. They usually post it on their website or include it with the product’s packaging. You can rely on it to claim the credit, but do not attach it to your return. Keep it with your tax records.
• This credit expired at the end of 2013. You may still claim the credit on your 2013 tax return if you didn’t reach the lifetime limit in prior years.

Residential Energy Efficient Property Credit

• This tax credit is 30 percent of the cost of alternative energy equipment installed on or in your home.
• Qualified equipment includes solar hot water heaters, solar electric equipment and wind turbines.
• There is no dollar limit on the credit for most types of property. If your credit is more than the tax you owe, you can carry forward the unused portion of this credit to next year’s tax return.
• The home must be in the U.S. It does not have to be your main home.
• This credit is available through 2016.

Use Form 5695, Residential Energy Credits, to claim these credits. For more on this topic refer to the form’s instructions. You can get it on IRS.gov or order it by mail by calling 800-TAX-FORM (800-829-3676).