Working multiple jobs can be an excellent way to earn extra money, gain meaningful experience, or even switch careers, but it may lead to some challenges when filing taxes. Juggling two or more jobs can affect your tax obligations, from changing your bracket to increasing your taxable income. By understanding how working multiple jobs affects your taxes, you can minimize your tax burden and avoid unwanted surprises.

The Basics

When you work multiple jobs, you have various sources of income, which can push you into a higher tax bracket and increase your tax liability. Accurately reporting your income and withholding the correct taxes from each paycheck is important.

If you don't withhold enough taxes throughout the year, you may owe money when you file your tax return. On the other hand, if you withhold too much, you'll receive a refund, but you'll have given the government an interest-free loan.

Taxes With Multiple Jobs

Working multiple jobs doesn't always lead to higher taxes. The number of jobs doesn't determine the tax you owe. Tax liability is all about the amount of income you receive and whether you have paid enough tax relative to your income. That being said, if having multiple jobs results in a more significant amount of income, it can lead to a higher tax bill.

Another factor is that when you have two or more jobs, your employers withhold taxes from every paycheck based on the W-4 form you completed. The W-4 form is the document that outlines how much tax needs to be withdrawn from each paycheck. Unfortunately, mistakes can happen when filling out your W-4 form, which means that your employer might withhold the wrong amount of tax. Consequently, you could owe additional taxes when you file your tax return.

Self Employment Taxes

If you decide to take on self-employment, it could impact the taxes you owe. This is because when you are self-employed, you must pay self-employment and income taxes.

Self-employment taxes are similar to Social Security and Medicare taxes and are automatically withdrawn from the paychecks of regular employees. When you earn through self-employment, you must pay these taxes on your own since no employer can pay them for you. So, if you have a regular job and a self-employment endeavor, you must pay both taxes, which could increase your tax liability.

Freelancers Taxes

When you work as a freelancer, you are responsible for paying your own taxes on a quarterly basis. This means you must estimate your income and tax liability each quarter and make payments accordingly.

Another difference is in the way that expenses are deducted. With a second job, you may be able to deduct certain expenses related to that job, such as travel expenses or uniforms. However, these deductions are limited and may not be as substantial as those available to self-employed freelancers.

Freelancers can deduct a wider range of business expenses, such as office supplies, equipment, and home office expenses. These deductions can significantly reduce your taxable income and lower your overall tax liability.

How To Stay On Top Of Taxes

To manage your taxes when working multiple jobs, there are a few things you can do:

• Adjust your withholding. You can do this by filling out a new W-4 form with each of your employers. This will help ensure that the correct taxes are withheld from each paycheck.
• Make estimated tax payments throughout the year. This can help you avoid a large tax bill at the end of the year. You can use Form 1040-ES to calculate and make these payments.
• Consider consulting with a tax professional. They can help you navigate the complexities of the tax code and ensure that you're taking advantage of all available deductions and credits.

Working multiple jobs can provide a much-needed boost to your income but also impact your taxes. By accurately reporting your income and managing your withholding and estimated tax payments, you can take control of your taxes and avoid any surprises at the end of the year.

Reporting Taxable Income

When you work two jobs, knowing how to properly report your taxable income to the IRS is important. Doing so will help you avoid penalties and fines for inaccurate reporting of your earnings. Here are some steps to follow when reporting taxable income on a second job:

• Determine your total income: The first step is to add all the income you earned from both jobs. This includes your salary, tips, commissions, and other payments.
• Calculate your taxes: Once you know your total income, you need to calculate the taxes you owe. This can be done using the IRS tax tables or tax software.
• Fill out a W-4: If you haven't already done so, you'll need to fill out a W-4 form for your second job. This form will allow your employer to withhold the correct taxes from your paycheck.
• Submit your tax return: When it comes time to file your tax return, you must include all your income from both jobs. This includes any income earned from freelance work or side hustles.
• Consider estimated taxes: If you're earning significant income from your second job, you may need to pay estimated taxes throughout the year to avoid penalties.

Conclusion

Handling multiple jobs can have various implications on your tax obligations, mainly related to your tax bracket and taxable income. It is vital to understand the impact of multiple jobs on your taxes and take practical measures to stay organized and minimize your tax burden. By following the helpful tips outlined in this article, you can make the tax filing process a breeze and ensure that you are paying the right amount without leaving any money on the table.