Managing two jobs is already a challenge, but when you think about the tax ramifications, it can feel even more complicated. You might wonder how to file taxes with two jobs, and ask yourself, “Do I pay more tax if I have two jobs?”
Juggling multiple jobs can impact your overall tax situation, potentially leading to higher liabilities or a smaller refund. In this article, we’ll break it all down with insights from tax experts to help you stay prepared and avoid surprises when tax season rolls around.
How working two jobs affects taxes
The U.S. tax system uses a progressive tax structure, meaning different portions of your income are taxed at different rates as you move through various income brackets. Each bracket has a set income range, and you only pay the higher tax rate on the portion of income that falls within that range.
For single filers in 2024, the tax brackets are as follows:
- 12%: On income over $11,600 up to $47,150
- 22%: On income over $47,150 up to $100,525
- 24%: On income over $100,525 up to $191,950
- 32%: On income over $191,950 up to $243,725
- 35%: On income over $243,725
As you take on a second job and your income increases, only the portion exceeding these thresholds moves into the higher tax brackets, leaving the rest taxed at the lower rates.
So, how much tax will I pay on my second job?
Let’s look at an example.
If you have a single job and earn $45,000 a year, you’ll fall into the 12% tax bracket for 2024. However, if you take a second job that pays an additional $15,000, your total income increases to $60,000. This moves a portion of your income—specifically, anything over $47,150—into the 22% tax bracket. So, the $12,850 that exceeds that threshold will be taxed at 22%, while the rest remains taxed at lower rates.
This doesn’t mean your entire income is taxed at the higher rate, only the portion that exceeds the threshold, which increases your overall tax liability slightly on the second job’s earnings.
Multiple jobs tax withholding: What you need to know
Each employer withholds taxes based on the information you provide on your W-4 form. However, if each employer withholds based on just that job’s income, they may not account for the combined effect of both incomes, leading to a potential shortfall in withholding.
If not managed properly, this could result in a surprise tax bill at the end of the year. To avoid under-withholding, you may need to adjust one or more W-4 forms by either withholding additional amounts or ensuring that your withholdings from one or both jobs reflect the total income you’re earning.
The IRS provides a withholding calculator to help you determine the appropriate amount of withholding when holding multiple jobs.
Can you file taxes for two jobs separately?
No, you cannot file taxes separately for two jobs—when you file a return, you file it as an individual (or in some cases, a couple filing jointly) and report all your earnings for the year. The IRS requires you to combine all income earned during the year, including wages, freelance income, and other sources.
“You’ll receive a W-2 from each employer, and while you’ll enter each one separately, it will all be included on the same tax return,” says Melanie Musson, insurance and finance educator at Insurance Providers. This combined income will ultimately determine your overall tax liability.
Does having multiple jobs lower your tax return?
The number of jobs you have has no direct impact on your tax return. It’s the combined income that matters. Whether you earn $100,000 from two jobs or $100,000 from one job, the tax treatment will be the same.
“The total amount of income you earn affects what you owe in taxes and what your tax refund or tax obligations will be at the end of the year,” Musson says.
When you earn income from two jobs, that total income could push you into a higher tax bracket, meaning you owe more in taxes than if you had just one job with a lower income. Or, if your employers didn’t withhold enough taxes throughout the year, you may not have paid enough in total, which can reduce your refund or lead to a larger tax bill at the end of the year.
However, this doesn’t mean you’ll always owe more when working multiple jobs. By adjusting your withholdings to account for your combined income, you can manage your tax liability more effectively and avoid surprises at tax time.
How to maximize tax benefits when working two jobs
There are several ways to maximize your tax benefits when working two jobs. “Take advantage of any deductions and credits you qualify for, such as retirement plan contributions which reduce your taxable income,” says tax attorney David Brillant. “You may also qualify for credits like the Child Tax Credit if you have dependents.”
Here are some handy tips to help you make the most of your tax benefits while working two jobs:
- Adjust your withholdings: Use the IRS withholding calculator to ensure that enough taxes are being withheld from each job to cover your combined income. This helps prevent underpayment and potential penalties.
- Take advantage of deductions: Make sure to claim all applicable deductions, such as those for business expenses, student loan interest, or health savings accounts, to reduce your taxable income.
- Maximize retirement contributions: Contributing to an IRA or a 401(k) not only lowers your taxable income but also helps reduce your overall tax liability.
- Consider filing quarterly taxes: If you’re unsure whether enough tax is being withheld from your paychecks, or if your combined income significantly increases your liability, consider making estimated quarterly tax payments to avoid penalties and a year-end tax surprise.
By planning ahead, you can avoid overpaying or underpaying your taxes, ensuring you maximize any potential tax refunds.
How to file taxes with two jobs: 6 essential tips
Filing taxes with two jobs follows the same basic process as filing with one job, with a few additional considerations:
- Gather your W-2s: You’ll receive a W-2 from each employer. Ensure that all your income from both jobs is accurately reported.
- Check your withholdings: Compare the total taxes withheld from both jobs to what you actually owe based on your total income.
- Use tax software: Most tax preparation software can easily handle multiple W-2s, making it straightforward to file on your own.
- Review for accuracy: Double-check that all income and withholding amounts are correctly reported to avoid delays in processing your return.
- Consider hiring a professional: If you want extra assurance, you can hire a tax professional to review your return and ensure that everything is correct.
- Keep records: Maintain organized records of income, expenses, and deductions throughout the year to streamline the tax filing process.
Filing taxes with two jobs doesn’t have to be overwhelming. “The key is planning ahead,” says Jared Duckett, Certified Public Accountant. “A tax professional can help you structure your withholdings and take advantage of any tax-minimizing opportunities based on your unique situation. Put money aside for taxes from each paycheck so you’re not caught off guard with a large tax bill.”
With proper planning, you can confidently file your taxes and make the most of multiple income streams, reducing the likelihood of any issues.
FAQs
Do I pay more taxes if I have two jobs?
Having two jobs doesn’t automatically mean you’ll pay more taxes, but combining income from both jobs may push you into a higher tax bracket, increasing your tax liability. Additionally, employers might under-withhold if they assume their job is your only one, leading to a larger tax bill. To avoid this, adjust your W-4 or consult a tax professional to ensure the right amount of tax is withheld.
How does working two jobs affect my withholdings?
When you work two jobs, each employer typically withholds taxes as if theirs is your only income, which can result in under-withholding. “You may need to make quarterly estimated tax payments to avoid penalties if too little tax is withheld,” Duckett says. Adjusting your W-4 with one or both employers can help ensure accurate withholding. If you’re still unsure whether that’s enough, consulting a tax professional can help you determine if additional steps, like quarterly estimated payments, are necessary to avoid penalties.
What forms do I need to file taxes with two jobs?
If you’re filing taxes with two jobs, the primary form you’ll need is the W-2, which you’ll receive from each employer to report your wages and taxes withheld. However, depending on your financial situation, additional forms may be necessary:
- 1099 Forms: If you have freelance or side income, you’ll need 1099-NEC or 1099-MISC forms to report non-employee compensation.
- Form 1040: This is the main form used for filing individual income tax returns.
- Schedule C: If you’re self-employed or earn freelance income, you’ll need this to report business income and expenses.
- Schedule SE: This is for self-employment taxes, if applicable.
- Schedule A: If you’re itemizing deductions, you’ll use this form to report them.
Given the complexity of managing multiple forms and ensuring accurate reporting, consulting a tax professional can be highly beneficial. A professional can help navigate the process, ensure all forms are properly filled out, and maximize your deductions, minimizing the risk of errors or audits.