If you didn’t already know by now, Chris Peach is the guy who started Money Peach from his kitchen table in March 2015. He started Money Peach alongside his “real” job, because isn’t that how most small businesses start off? They usually are created alongside a “real” job.
Believe it or not, Peach’s real job is on a firetruck at one of the busiest fire houses in the city he serves. If you weren’t already aware, Chris is a full-time firefighter and paramedic. He is also a
part-time full-time blogger/entrepreneur for Money Peach!
He is a problem solver whether you’re house is on fire, you’re having a heart attack, or you’re needing advice on what debt to pay off first 🙂
Just like many of you, Peach wears more than one hat for work!
Working More than One Job?
If you are one of the many people like Chris and myself who are thinking about, or already supplement your income by having more than one job, this post is going to provide you with some key takeaways for making sure your taxes are in check!
Working more than one job is tough. No, actually it is RIDICULOUSLY HARD. It requires a ton of sacrifice and self-motivation to tell yourself to keep going, even when you are dead tired. The icing on the cake is when you’re drinking your 4th cup of coffee to keep yourself going and you scroll through your Facebook feed and see those around you are taking time off to relax. Not cool!
However, before you go out and earn a bunch of income from your multiple job sources, you should first realize there are some special tax considerations for those with multiple jobs.
Here are 3 things you need to consider if you have multiple jobs. Even if you’ve already done your taxes for this year, these may come in handy come tax time next spring.
1. Multiple Tax Withhold Forms May Result in Too Few Withholdings
While you may not enjoy paying taxes and taking home a smaller paycheck, you do want to be sure they have been prepared correctly and withheld from your paychecks all year so you don’t owe a crazy amount of money come next April.
If you have multiple jobs, a separate withholding form must be filled out for each employer, and neither of those forms takes into account what is withheld from the other employer. Once your taxes are calculated, you might find that you owe a substantial amount in income tax for the year as a result.
How Do You Avoid Owing Too Much and File an Accurate Return?
The answer is to simply change your withholding on a new W-4 Form with your employer.
**Two important things to remember when looking at your W-4:
- Claim all the allowances you normally would on the W-4 form for the job that pays you the most.
- Claim Zero on all W-4s for other employers.
Why does this work?
Claiming more allowances results in less being withheld from your paycheck for that employer.
On the other hand, claiming zero would result in the maximum being withheld from your paycheck for that employer.
Therefore, since you are claiming zero for every employer except the place where you earn the most, you shouldn’t have a huge tax burden at the end of the year.
2. Two Earners/Multiple Jobs Worksheet
The second page of the IRS Form W-4 contains a Two-Earners/Multiple Jobs Worksheet.
You may need to fill out this portion of the form if you have multiple jobs or are married and both you and your spouse work.
The intent here is to ensure enough taxes are withheld from your paycheck to prevent you from owing a large payment to the IRS once your taxes are calculated. There is an income chart at the bottom of the worksheet to help you fill out the form.
Since you can’t claim less than zero, an additional dollar amount can be withheld from each paycheck of the employer of your choice.
The goal is to be as close as possible to the amount actually withheld and the amount you actually owe in taxes at the end of the year. This will result in having to write a much smaller check to the IRS when you to file your next tax return.
3. Social Security Tax
If you have multiple jobs, you need to be cautious in order to avoid an overpayment on your social security tax.
According to the Internal Revenue Service, for tax year 2016, the social security tax income limit is $118,500. If you hit that mark with your total combined income, you won’t need to pay any more social security tax for the year.
If you have gone over the limit and the amount withheld was over $7,347 for employees ($14,694 for self-employed) which is the maximum amount to be withheld for 2016, an adjustment must be made. This is done on line 71 of your 1040 form. Talk to your tax professional if you have any concerns about this.
The Bottom Line
With over 70,000 pages in the tax code, it is going to be impossible to get your taxes “just right”. Right when you think you have it all figured out, they add one more page to the tax code and boom, your taxes are no longer perfect!
Just remember this: The best you can do is simply the best you can do when it comes to paying Uncle Sam.
Therefore, if you’re one of those hard-working rockstars who dives in and takes on multiple jobs with multiple employers, then bookmark this article so you have the valuable information you’ll need to help you with your next tax return.
What Do You Think?
Can you think of other tax considerations for those with multiple jobs? If so, leave me a comment below and share this info with the people you like, love, can’t stand, or are somewhere in between via the buttons below:
As always, thanks for being part of Money Peach,