Taxes on Two Jobs

Save

Moonlighting can cause headaches with income taxes because a second income directly affects your annual tax return. To avoid withholding too much in taxes during the year or not withholding enough, pay attention to the W-4 form you fill out with your employers. Acting as an independent contractor can expose you even more to this risk because you are required to track your own withholding. You may also be liable for self-employment taxes. Check with your tax adviser for guidance on self employment taxes and mandatory tax withholding.

W-4 Tax Withholding

  • Pay close attention to the W-4 tax withholding with each of your employers to see if enough taxes are being withheld. Increasing the withholding on your W-4 forms can help you avoid underpayment of taxes during the year. The taxes will be withheld from your regular paychecks and credited to you on your tax return when you file at the end of the year. The IRS has a withholding calculator available to help you calculate the amount to withhold. The information is based on your filing status, income and any deductions you plan to claim.

Self-Employment Tax

  • If you are an independent contractor, you will need to track and withhold taxes separately. A part-time independent contractor could be someone who is a freelance writer for a magazine. If the writer makes more than $400 in any year, she would receive a 1099 MISC form from the publisher. In addition to income tax, the writer would be responsible for paying self-employment taxes for Social Security and Medicare. An employer normally pays half of these taxes, but as an independent contractor you are responsible for the entire amount. Currently the total self-employment tax is 13.3 percent for the 2011 tax year.

Independent Contractors With More Than One Job

  • If you work as an independent contractor for two different companies and neither withholds taxes, you may be required to pay quarterly estimated taxes on IRS Form 1040 ES. The IRS states that a taxpayer must pay current year quarterly estimated tax if he expects to owe at least $1,000 in tax for the current year or if he expects his withholding and credits to be less than his projected tax owed. Check with your tax adviser to see if you are required to complete Form 1040 ES.

Freelancers With a Full-Time Job

Related Searches

References

  • Photo Credit Ryan McVay/Photodisc/Getty Images Medioimages/Photodisc/Photodisc/Getty Images Comstock/Comstock/Getty Images
Promoted By Zergnet

Comments

Resources

You May Also Like

Related Searches

Check It Out

4 Credit Myths That Are Absolutely False

M
Is DIY in your DNA? Become part of our maker community.
Submit Your Work!