One summer job opportunity is the unpaid internship. With the job market being so tight, it might make sense for you to consider working at an unpaid internship to gain some practical work experience which would make you easier to hire in the future. But before you accept an unpaid position, there are a few things that you should think about:
- Do you need the money? Dumb question, I know, every teenager needs money. But seriously, if you need a job because you have to pay your tuition, or buy a car, or whatever, then the unpaid internship is not an option for you. You’re better off flipping burgers at McDonald’s and getting a paycheck.
- What’s in it for you? I hate to sound like a mercenary, but if you’re going to work someplace for free, there has to be an upside to it. Will you learn a new job skill? Will you meet people who can help you get a better job next summer or during the school year? Will it look good on your resume? What is it about this job that makes it worth it to you to do the work for free? If the answer is nothing, then maybe you shouldn’t waste your time there.
For example: there’s an organization I know that routinely hires unpaid interns. The positions are part-time and usually last three or four months. The interns work on interesting projects, meet all sorts of clients of the business, and their employers openly promote them, “Do you know our intern Sarah? She’s graduating in May with a degree in accounting, I was wondering if you were looking to hire anyone?” No, I couldn’t hire Sarah but I did know of a company that was hiring and I suggested it. Her employer said, “I know they’re hiring, but they have a high turnover rate. I don’t think they treat their employees very well, we want Sarah to find a good job.” If you’re taking on an unpaid internship, you want to be someplace like that, where they actually care about you.
Another organization I know had a completely different attitude about the unpaid intern. The job consisted of sitting alone in a room making telephone solicitations for 40 hours a week. That’s not an internship, that’s slave labor. Their reasoning was that the economy was so bad that they could get a teenager to do the work for free if they called it an internship. They gave up on the idea of that internship, but I can imagine other organizations using the same logic. Here’s a good rule to thumb to follow: if you are actively engaged in bringing money into an organization, then you should be compensated for that type of work. Sales people get paid for their sales, period. If the job consists of sales or soliciting funds, it should be a paid position.
Taking on an unpaid position can be even more challenging than taking that paid job. For one thing, you’re going to work every day and there’s no paycheck waiting as your incentive, you have to really want the job. Do your homework; Google the company, make sure its a place you won’t be embarrassed to say you worked for. Maybe even Google your boss, make sure he’s not some serial killer that was just released from prison. (You think I’m joking here, no. Exaggerating, yes, joking, no. Google your boss.) Ask questions about what you’re expected to do and how you’re expected to do it. Know what you’re getting into.
If you do decide to take on that unpaid internship, treat it like a paid position. Dress appropriately for the job, always be on time, and do your best work. The reason you take the unpaid internship is to be a stepping stone to a paid position. The best way to do that is to make a good impression on the people you’re working for. If you slack off, you won’t get good references, and that’s the whole point of taking the unpaid job in the first place.
I just received my IRS newsletter and they offered a tax guide about teens getting summer jobs. I was going to blog about that anyway, so I thought I’d read their guide and use a lot of their points. Here’s the link: http://www.irs.gov/pub/irs-utl/oc_-_may_-_summrjobtips_050211.pdf. If you took a look, you’ll notice that they even set it up for folks like me to copy and paste. Kinda sweet.
But here’s my problem with it, the page says that if you do odd jobs like babysitting or lawn mowing then you have to record that as self employment and pay self employment tax on it. That means that if I hire Alex from across the street to mow my lawn once a week, and I pay him $25 a week for the entire lawn season—that’s 28 weeks where I live, he’ll have earned $700 and, according to that IRS newsletter, he’ll have to pay self employment taxes on that. Normally, a student earning only $700 would pay no taxes at all, but because Alex is self employed, he’d have to pay about $90. Suddenly that lawn mowing job isn’t looking so good.
Let’s call the IRS to the rescue! You see, in IRS publication 926 (yes that sounds awfully dull but ya gotta fight fire with fire) the IRS lists jobs that are considered to be “household workers”. One of those jobs is a yard worker, like Alex. (Babysitter is another one.) What makes a household worker an employee is if the homeowner controls not only what work is done, but how it’s done. For example, I want Alex to mow my lawn on Thursdays. I want the grass shorter in the spring and longer in the summer, and I want him to leave the clippings on my lawn unless it’s really overgrown. Alex doesn’t have a lot of say in this so that makes him an employee.
Why does any of this matter? Because as a household employee, Alex doesn’t have to pay self employment taxes, that would be his employer’s job (that would be me.) But it gets better, since I’m only paying him $700 this year, his wages from me are below the threshold for having to pay social security and medicare taxes so we’ve got a “win/win” situation. As long as the employer pays a person less than $1,700 in a year, then there are no employment taxes. Alex can work and keep his whole $700.
Now here’s the best part of all—Alex is only 16. If you hire a household worker who is under age 18 at any time during 2011, you do not pay employment taxes at all. I could give Alex a raise (please don’t let him read this, okay?) I could also hire him to do some landscaping work in addition to mowing my lawn. Let’s say that I paid Alex $3,000 for work he did in my yard. If he filed a tax return as being self employed, he’d pay almost $400 in self employment taxes for 2011. As my household employee, he pays $0. (I live in Missouri, so if I paid Alex over $1000 per quarter, I would have to pay for unemployment insurance, but that would by my expense, the boss, not the employee.)
So, if you’re looking for summer work and you’re under 18, don’t overlook those old standbys of babysitting and lawn care. And if somebody tries to make you pay self employment taxes, tell them to go read Publication 926. It’s all there in writing. http://www.irs.gov/publications/p926/ar02.html#en_US_publink100086722
Schools almost out and it’s summer job time. Here are five things you should know before you go to work:
1. The federal minimum wage is $7.25 an hour, but if you’re under 20 years old and you’re a new hire, the business can legally pay you $4.25 for the first 90 days of your job. There are also exceptions to the minimum wage laws for student workers, student learners and persons with disabilities; so if you fall into one of those categories you may not receive the $7.25 per hour even if you work longer than 90 days.
2. The minimum wage for people who get tips is $2.13 per hour, (basically restaurant wait staff) if that amount plus your tips brings you up to the minimum wage. If you’re working in a restaurant keep really good track of the tips you receive. Every night you’re going to want to count out your tips and write it down. (It’s called a tip log.) You might need this as evidence at tax time that you didn’t really make as much money as your employer claims you did.
3. Wages: if your employer is going to pay you “wages”, you will need to fill out a W4 form. Here’s what one looks like: http://www.irs.gov/pub/irs-pdf/fw4.pdf Don’t bother with all the questions at the top, just go straight to the bottom part where you start filling in your name and address. Check the box that you are single. On line 5 you are going to write 0 exemptions. If this is your first job ever and you’re only going to work over the summer and you are positive that you won’t make over $5,600 for the entire year, then write the word “exempt” on line seven. That means you’re telling your boss that you don’t want any federal income tax withheld. If you want to get a refund next April, then don’t write exempt, just keep the 0 on line 5 so there will be withholding.
4. Social security and medicare. It’s kind of hard to wrap your head around the idea that you’re paying social security and medicare taxes when you’re only 16 or 17, but you are. When you get your first paycheck, even if you say that you don’t want any federal income tax withholding, you will still be paying social security and medicare taxes. Let’s say that you get a job at $7.25 an hour and you worked for 20 hours before your first paycheck. Your pay should be $145. Your check though will only be for $136.81, because your employer has to take out $6.09 for social security and $2.10 for medicare.
5. Self employment. Some employers don’t want the hassle of handling payroll taxes on their summer help. They don’t give you a W4 form to fill out for your withholding, they give you a W9, it looks like this: http://www.irs.gov/pub/irs-pdf/fw9.pdf?portlet=3 What that means is your boss isn’t going to pay your social security and medicare taxes for you—you’ll have to do it yourself. This is really important—if you are a W9 worker, then you’ll have to pay income taxes in April. It means that you are self-employed and that you own your own business. Generally, students who make less than $5600 a year pay no income tax come April, but if you are self employed, you will pay taxes if your income is over $400. Every year I have to help students who found they had to pay taxes they had no idea they owed. It’s okay to work a W9 job, but know that you’re going to have to pay taxes on it. Here’s a link for more details on that: http://robergtaxsolutions.com/2010/09/employee-or-contract-labor/
Good luck with your job hunt and have a great summer!