NOTE: Interns working from Canada will be paid by Microsoft Canada in Canadian dollars, and as such, none of the advice on this page applies to Canadian interns.

Be aware of how you need to pay taxes on your intern income, and ways to make taxes adapt better to your situation.

This guide also goes over how to make better financial choices, including making sure you don't get too much money withheld from your paycheck, as well as legal ways of reducing your state income tax liability.

This is not professional tax advice. Do not hold the writers of this guide liable for any legal issues. If you have further questions please attend the income tax info session Microsoft puts on for interns in the summer or contact a CPA.

Income taxes

Federal income tax

All interns will need to pay federal income taxes. There are three taxes levied on your income; income, Social Security, and Medicare:

• Income tax: variable, depends on your income, but around 10-15% for most interns
• FICA taxes: 15.3% (7.65% withheld from your paycheck, 7.65% to be paid by you in tax returns)
  • OASDI (Social Security) tax: 12.4% (6.2% withheld, 6.2% to be paid by you)
  • Medicare tax: 2.9% (1.45% withheld, 1.45% to be paid by you)

A certain portion of your taxes are withheld automatically from your paycheck.

• Half of your FICA taxes are withheld, and you pay the other half in your tax returns. You cannot change this.
• The amount of income tax withheld from your paycheck varies by how you file your W-4. You can change the amount so you get less money withheld (= more money in your pockets faster). Withheld money doesn't get "stolen" from you; it's taken into account when you file your tax return and may be refunded to you in a tax refund. However, the "withheld" money is essentially you giving an interest-free loan to the IRS. That's why being deliberate about your W-4 can help you reduce the amount of income tax withheld. Though, do be cautious; you do have to pay interest.

State income taxes

Additionally, you may be liable for state income tax from one or more states, depending on which state(s) you work from and reside in.

State income tax jurisdiction derives from two factors: where you work out of and where you live.

Where you work out of: Almost all interns will be "working" out of Microsoft's Redmond campus, but thankfully there is no state income tax in Washington State.

Where you reside: Interns living 100% of the time in Washington State do not owe any state income tax, because WA does not have a state income tax. Interns working 100% from Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, and Wyoming also do not have to pay any state income tax. Interns working from other states will need to pay their state's income tax.

Microsoft does not change your intern pay based on your location (except for, maybe, interns based out of the Bay Area offices). Hence, some interns will be taxed more heavily than others. This is because the 50 states have different tax laws. While tax evasion is illegal and definitely not what we are advocating for here, you may want to seriously consider working in a more tax-favorable state, given the virtual nature of this internship. Living in Seattle for the duration of your internships has its tax perks. If you're looking for a less expensive place than Seattle, other options include Austin, Texas.

If you move between different states during your internship, you will (most likely) be liable to pay income tax in ALL states in which you worked. Please plan accordingly and do your research.

Form W-4