AUGUSTA, MAINE -- Before you start a summer job, take a vacation – or a "staycation" – or send the kids off to camp, the Internal Revenue Service wants you to know that certain summertime activities may qualify you for tax breaks. The IRS also advises that you can avoid problems at tax time by addressing certain issues now.
"Enjoy the summer, but be careful not to miss out on tax breaks or create tax problems," said IRS spokesperson Peggy Riley.
Here are some tips from the IRS that may help you lower your taxes and avoid tax problems:
¨Make sure your summer employer classifies you correctly. Summer workers sometimes are misclassified as independent contractors (self-employed) rather than as employees. Employers who do this usually fail to withhold taxes from the worker's wages, often leaving the worker responsible at tax time for paying income taxes plus Social Security and Medicare taxes. Workers can avoid higher tax bills and lost benefits if they know their proper status.
¨Summer workers may be exempt from tax withholding. If you got a refund of all withheld income taxes for 2008 and you expect the same for 2009, you may claim "exempt" on your Form W-4 when you're hired. That can increase your paycheck and possibly let you avoid having to file a 2009 federal tax return. If you claim exempt status, your employer should withhold Social Security and Medicare taxes from your wages but no federal income tax.
¨Getting married? Newlyweds can help make the wedded bliss last longer by doing a few things now to avoid problems at tax time. First, report any name change to the Social Security Administration before you file your next tax return. Next, report any address change to the Postal Service, your employer and the IRS to make sure you get tax-related items. Finally, use the Withholding Calculator at IRS.gov to make sure your withholding is correct now that there are two of you to consider.
¨Clean out, donate, deduct. Those long-unused items you find during spring or summer cleaning can probably be donated to a qualified charity and may garner you a tax deduction as long as they're in good condition. You must itemize deductions to qualify to deduct charitable contributions and you must have proof of all donations.
¨Help with service project, deduct mileage. While there's no tax deduction for time donated toward a charitable cause, driving your personal vehicle while donating your services on a trip sponsored by a qualified charity could get you a tax break. Itemizers can deduct 14 cents per mile for charitable mileage driven in 2009. Keep good records of your mileage.
¨Get tax credit for summer day camp expenses. Many working parents must arrange for care of their younger children under 13 years of age during the school vacation period. A popular solution — with favorable tax consequences — is a day camp program. Unlike overnight camps, the cost of day camp may count as an expense towards the Child and Dependent Care Credit.
¨Owner of vacation home may get two tax breaks. First, mortgage interest and real estate taxes paid on a second home are usually deductible if you itemize. Second, if you rent your vacation home out fewer than 15 days per year, that rental income is typically not taxable.
¨Report winnings, possibly deduct losses. If Lady Luck smiles on you during your vacation, remember that gambling winnings must be reported on your tax return. Losses are deductible only if you itemize and have winnings that equal or exceed your losses. Good records are a must.
¨Deduct job-related moving expenses. Relocating due to a job? A tax break may be coming your way and you won't have to itemize deductions to get this one. If you can satisfy the distance and time tests, job-related moving expenses are deductible. Other requirements apply if you are self-employed. Members of the armed forces do not have to meet these tests if the move was due to a permanent change of station.
For details about any of these topics, visit www.irs.gov or call the IRS toll-free at 1-800-829-1040 (1-800-829-4059 TDD).
IRS Media Relations Specialist