Lori Meadows
Students working part-time jobs often wonder if they have to pay taxes on their earnings. In the United States, student workers are not automatically exempt from paying taxes. Their earnings may be subject to federal and state income taxes, and they may also be required to pay FICA (Social Security and Medicare) taxes, depending on their employment status and the number of credits they are enrolled in. International students may also have different tax requirements and should consult with their institutions' tax offices.
| Characteristics | Values |
|---|---|
| Student exemption from FICA taxes | Students working for a school, college or university where they are pursuing a course of study are exempt from FICA (Social Security and Medicare) taxes. |
| Student worker tax exemptions | Post-qualifying Ph.D. candidates in TA, GA, or student employee positions who are working on their dissertations are exempt from FICA tax withholding. |
| Summer employment | Summer employment is not exempt from FICA taxes unless enrolled/attending class in accordance with half-time standards for the summer session. |
| Federal income tax | Students are not automatically exempt from federal income taxes. |
| State income tax | Students may be subject to state income taxes. |
| International students | International students may receive tax treaty benefits and should consult with International Student and Scholar Services for assistance on tax forms. |
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What You'll Learn
Student workers and FICA tax exemption
Students who work part-time while pursuing a course of study are often exempt from paying FICA (Social Security and Medicare) taxes on their wages. This exemption applies to students employed by a school, college, or university where they are enrolled. The primary function of the organisation employing the student is considered, and the nature of the employment relationship is also assessed to determine if the student's primary purpose at the institution is education or employment.
For example, a student working as a teaching assistant or graduate assistant at their university may be exempt from FICA taxes if they are enrolled at least half-time. This exemption also applies to students enrolled less than half-time if that is all they need to complete their degree program. However, postdoctoral students, postdoctoral fellows, medical residents, and medical interns are not eligible for the student FICA exemption because their work is not considered incidental to their course of study.
Additionally, students working on their dissertations as part of a post-qualifying PhD program may be exempt from FICA tax withholding. To qualify for this exemption, students must be registered for full-time or part-time study, either on-campus or off-campus. However, if a student in this category holds any FICA-eligible employee position during the calendar year, their wages will be subject to FICA withholding.
It is important to note that summer employment is generally not exempt from FICA taxes unless the student is enrolled and attending classes according to the half-time standards for the summer session. The criteria for exemption may be re-evaluated each semester to determine the proper FICA tax withholding or exemption for student workers.
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Federal income tax withholding
In the United States, if you are a student worker, the amount of federal income tax withheld from your paycheck depends on your income, age, and dependency and filing status. If your income is below the filing requirement for these factors, you don't need to pay federal taxes on your income and don't need to file a federal income tax return.
If you are claimed as a dependent on your parent or guardian's income taxes, you may be exempt from income tax withholding. In this case, you would write "Exempt" on the relevant line of your Form W-4, which is used by employers to determine the amount of tax withheld from your paycheck. You may also need to submit a Form SS-8 if you believe your employer is treating you as an independent contractor when you are an employee.
If you are a post-qualifying PhD candidate in a TA, GA, or student employee position, you may be exempt from FICA (Social Security and Medicare) tax withholding. To qualify for this exemption, you must be working on your dissertation and be registered for Full-Time Matriculation Continued, Full-Time or Part-Time Study (either on-campus or off-campus). You must submit a FICA Exemption Request Form, signed by your department and yourself.
Summer employment is generally not exempt from FICA taxes unless you are enrolled in classes in accordance with half-time standards for the summer session. Services performed between the fall and spring semesters are usually eligible for the FICA exemption.
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State income tax
Students working part-time or full-time jobs may be subject to federal and state income taxes. However, there are certain exemptions for students, such as the exemption from FICA (Social Security and Medicare) taxes for students working for a school, college, or university where they are pursuing their course of study. This exemption also applies to undergraduate students enrolled for six or more credits and working on-campus. Additionally, students with income below a certain threshold may not owe federal taxes and may not be required to file a federal income tax return.
It's important to note that each state has its own filing requirements for state income taxes. For example, in North Carolina, students working for the state may not owe any state income taxes, as mentioned by a student worker in a Reddit post. However, this may vary depending on the state and the individual's specific circumstances.
To manage state income tax, students can use forms such as Form W-4 and state-specific forms (e.g., NC-4 in North Carolina) to indicate how much federal and state tax their employer should withhold from each paycheck. These forms should be carefully reviewed and completed to ensure accurate withholding. Additionally, students can refer to resources provided by their educational institutions, such as the International Student Employment Guide mentioned by UNC, to understand their specific state's requirements.
It's worth noting that international students may have different tax considerations. For example, they may receive Form 1042S, which reports earnings that were exempt under a tax treaty. International students with specific immigration statuses, such as F-1 or J-1, can seek assistance from their educational institution's International Student and Scholar Services to navigate their tax obligations.
While student jobs with universities may be exempt from payroll taxes, students should carefully review the requirements for exemptions and consult official sources, such as the IRS, to ensure they comply with tax laws. Understanding state income tax requirements and staying informed about exemptions can help student workers effectively manage their tax obligations.
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Tax treaty benefits for international students
International students who are considered non-residents for tax purposes may be able to take advantage of tax treaty benefits. These benefits are agreements between the US and the student's home country, and they can provide exemptions or reductions on certain types of income. It is important to note that tax treaty benefits typically apply to federal taxes and not state taxes.
To claim tax treaty benefits, international students may need to complete specific forms, such as Form 8233 and Form W-8BEN. These forms help to ensure that tax treaty benefits are applied to their income and that the correct amount of tax is withheld. Additionally, students may need to provide documentation such as a tax treaty statement and their US visa information.
The specific benefits available to international students depend on the treaty between the US and their home country. For example, Korean international students are exempt from tax on any income of $2,000 or less from personal services performed, while French citizens are not subject to US tax on income of $5,000 or less from personal services.
It is recommended that international students seek advising services or consult with a tax professional to understand their specific situation and determine their eligibility for tax treaty benefits. Additionally, resources like Sprintax can help international students navigate the complexities of US tax filing and ensure they claim all the tax relief they are entitled to.
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Determining worker status
Tax residency is a legal status that determines which state has the right to tax your income. This status is based on the concept of "domicile," which refers to a person's permanent place of legal residency, "true home," or the place they intend to return to after being away. An individual can only have one domicile at a time, but it is possible to be a "statutory resident" of another state if certain conditions are met.
To establish domicile in a particular state, one must demonstrate the intention to make that state their permanent home. This can be supported by various factors, such as owning a home, registering to vote, and other aspects of a person's life. Simply filing a certificate of domicile or registering to vote in a new location may not be sufficient to change domicile.
To be considered a statutory resident of a state, an individual typically needs to maintain a permanent place of abode in that state for a substantial portion of the taxable year, usually spending over half a year (more than 183 or 184 days) there. This can result in dual residency, where one owes taxes to two states, especially if one works in one state and lives in another.
To avoid double taxation, it is essential to understand the residency rules of the states involved. Certain states have reciprocity agreements, allowing residents of one state to work in the other without paying income tax to the second state. When reciprocity does not apply, one may need to file non-resident taxes in the state where they work and resident returns in their home state, potentially claiming credits for taxes paid to the other state.
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Frequently asked questions
Student workers in the US are not automatically exempt from paying taxes. They are subject to federal and state income taxes, and their earnings may be subject to Medicare and Social Security taxes. However, students working for a school, college, or university where they are pursuing a course of study may be exempt from FICA (Social Security and Medicare) taxes.
The FICA exemption applies to students enrolled at least half-time in a course of study who are employed by the school, college, or university where they are enrolled. Undergraduate students working on-campus and enrolled for six or more credits are generally exempt from FICA taxes during the academic year.
To qualify for the FICA exemption, students must meet certain requirements, including being enrolled at least half-time in a course of study and performing services that are considered incidental to their education. Students should review the specific criteria and eligibility requirements set by their educational institution and the IRS to determine if they qualify for the FICA exemption.
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