All employees have income tax withheld from their pay, right? Not necessarily. You may be exempt from withholding if:

You can be claimed as a dependent (usually on a parent's return),
Your total 2005 income will not be over $5,000,
Your unearned income (interest, dividends, etc.) will not exceed $250, and
You had no income tax liability for 2004.
You'll still have to pay Social Security and Medicare taxes, but skipping unnecessary income tax withholding will put more money in your pocket now. Read Form W-4 carefully before filling it out for your employer.

If customers tip you, those tips are taxable. You must keep track of the amounts, include them on your tax return, and — if they total $20 or more in a month — report them to your employer by the middle of the next month.

Source: Internal Revenue Service

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