Students Taking a Summer Job

As the school year ends in South Florida, many students take on summer jobs. But for immigrant families and local business owners, a teenager’s first job is a critical tax event.

Whether your child is working at a local store or you are hiring them to work in your own family business, understanding how the IRS treats student income can save your family thousands of dollars and prevent costly compliance issues.

4 Important tax strategies every parent and business owner must know about student summer jobs.

1. The “Family Business” Advantage

This can be a massive tax break! If you own a small business in Florida, hiring your own child is one of the most powerful, legal tax-reduction strategies available. If you operate as a Sole Proprietorship or a Single-Member LLC, hiring your child under the age of 18 comes with incredible benefits:

• No Payroll Taxes: Their wages are completely exempt from Social Security and Medicare (FICA) taxes, as well as federal unemployment (FUTA) taxes.
• Business Deduction: You can deduct their wages as a legitimate business expense, directly lowering your company’s taxable net income.
• Tax-Free Income for the Teen: Thanks to the standard deduction, your child can earn thousands of dollars completely tax-free at the federal level.

Compliance Note: The work must be legitimate, age-appropriate, and paid at a reasonable market rate. The IRS closely monitors family payrolls. Hispano Tax Service can handle your bookkeeping and payroll to ensure everything is strictly by the book.

2. W-2 Employees vs. 1099 Contractors

If your student is working for someone else or doing side gigs (like tutoring, landscaping, or gig-economy delivery), pay close attention to how they are classified:

• W-2 Employees: On their first day, they will fill out a Form W-4. Their employer will automatically withhold taxes from their paychecks. Even if they don’t earn enough to owe income tax, they should file a return next year.
• 1099 Independent Contractors: If they earn more than $400 from self-employment or gig work, the IRS requires them to file a tax return and pay self-employment taxes.

3. Don’t Forget About Tip Income

If your teenager gets a summer job waiting tables in Doral or Fort Lauderdale, they must understand the rules regarding tips. All tip income is taxable.

4. IRS Representation: When Things Go Wrong

A common mistake among immigrant families is improperly claiming dependents who have their own income, or business owners misclassifying their children’s labor. This can quickly trigger an IRS audit or a CP2000 notice (a letter stating the IRS found a mismatch in reported income).

If you receive an intimidating letter from the IRS regarding your family business payroll or your child’s tax return, do not ignore it and do not call the IRS yourself.

At Hispano Tax Service, our licensed Enrolled Agents provide professional IRS Representation. We speak directly to the IRS on your behalf, untangle payroll messes, and protect your business from aggressive penalties.

Need Help Setting Up Payroll for the Summer?

Whether you need to set up formal payroll for your teenager or simply want to file an accurate tax return to get their summer withholdings refunded, our bilingual team is here to help.