For anyone who has two or more jobs in the United States, managing your taxes requires special attention. The IRS taxes all of your income as a single lump sum at the end of the year. This means that if you don’t file your taxes on time during the year, you risk facing a large unexpected tax bill and penalties when you file your annual tax return.
Here are the most important things you need to know to avoid unpleasant surprises:
1. The risk of “Underwithholding”
When you start a regular job (W-2), you fill out a W-4 form so your employer knows how much tax to withhold from your pay. Here’s the problem: every employer calculates taxes as if it were your only job.
If you have two jobs that pay you $30,000 each, each employer will withhold very little tax from you (since $30,000 falls into the low tax bracket of 10%-12%). However, at the end of the year, the Internal Revenue Service (IRS) will combine your income into a single amount of $60,000 . This amount moves you into a higher tax bracket. As a result, you will owe the government the difference in taxes that were not withheld during the year.
2. How do you resolve this through Form W-4?
To prevent this situation, you should update your W-4 form with your employers. On the new W-4 form, there is a specific section for this case:
- Step 2: Multiple Jobs: You must check the “Multiple Jobs” box on both W-4 forms if the income from both places is similar.
- For large salary differences: If one job pays much more than the other, use the IRS Tax Withholding Estimator to calculate exactly the additional amount the primary employer should withhold (Step 4c – Extra Withholding).
3. Combining W-2 with Contractor Work (1099)
If you have a main job with a W-2 and a second job as a freelancer or independent contractor (e.g. Uber, DoorDash, construction with a 1099):
- Not a single cent of tax is automatically withheld from 1099 work.
- Solution: You can ask your W-2 employer to withhold more taxes from your regular pay to cover the liabilities you create from 1099 work. This saves you from having to pay taxes every quarter (Estimated Quarterly Taxes).
4. Overpayment of Social Security Tax (FICA)
All employees pay 6.2% of their income to Social Security, but this tax has a maximum annual earnings limit (e.g. $168,600 or more, depending on the fiscal year).
- If the amount of both of your jobs exceeds this limit and both employers have withheld Social Security tax from you, you will pay more than you should.
- The good news is that this excess (Excess Social Security) will
💡 Practical Advice
Don’t wait until the end of the year to see what will happen.
To determine if you are okay with taxes, tell me:
- Are both of your jobs W-2 , or do you have a combination of W-2 and 1099 ?
- Are the salaries of these jobs roughly equal , or is one much higher than the other?