You might have a few side hustles, maybe even work full-time and freelance out, drive for Uber, or whatever. Hey, that’s awesome! But let’s be real, though: dealing with taxes when you’ve got a few different sources of income can be a bit of a pain in the butt. But don’t worry too much, I got you! Let’s talk about how you can keep more of that hard-earned cash in your pocket and not in the hands of the IRS.
Why Multiple Jobs Can Mess with Your Taxes
Okay, so you’re probably thinking, “I already pay taxes with my full-time job; do I really need to concern myself with this side job?” And the answer is… yep! If you aren’t careful, you might find yourself overpaying or underpaying. Neither one of those is any fun; trust me.
Let’s say you work 9 to 5, and your taxes are taken out of your check. But then, you drive for Uber on the weekends, and no taxes are taken out. Well, you know what? If you don’t readjust, you’ll probably owe the IRS a lot at the end of the year. What a pleasant surprise!
Strategy 1: Adjust Your Withholding
Here’s the move to adjust your W-4 withholding at your primary job depending on your additional income sources. It would be similar to saying for your primary job, “Hey, I’m making extra money, so please take out a little more for taxes.”
How to do it:
- Grab your last pay stub(s).
- Use the IRS Tax Withholding Estimator (yes, it’s legit and super helpful).
- Update your W-4 form based on the estimator’s advice.
If you change your W-4 to show that your total income is $75,000, for example, and you earn $60,000 from your day work and $15,000 from a weekend side job, the main job will effectively withhold taxes to cover all of your income. It’s just as simple as pie.
To discover more essential tax forms, read Introduction to Common U.S. Tax Forms.
Step 2: Save Like a Boss for Untaxed Income
Most likely, no taxes are being withheld if you’re making money from jobs like tutoring, pizza delivery, or freelancing. Your cheat code is as follows: 20–25% of that untaxed income should be set aside for taxes.
Let’s say you work as a delivery driver and earn $500 every week. When you set away $125 for taxes, you’ll be prepared to pay when tax season arrives. No rushing, no anxiety. Expert advice? It’s a lifesaver to open a separate savings account specifically for taxes!
Strategy 3: Know the Power of Quarterly Taxes
The IRS wants its piece as quickly as possible if your side job is consistently profitable (sorry, but it’s true). In this case, quarterly appeared taxes are important.
How it works
You calculate your bill on the extra income and submit it four times a year. This is similar to paying in small amounts rather than all at once.
For instance, you would pay about $2,500 in taxes if your side business brought in $10,000 this year. It’s much simpler to handle if you divide that up into four $625.
Step 4: Don’t Overpay—Be Strategic
Although it may seem like a smart idea, over-withholding sends your money to the IRS with no interest. Rather, seek out the amount you genuinely deserve exactly as acceptable.
For instance, if your permanent job withholds far too much, you’re most likely receiving smaller payments than necessary. Modify that W-4 and use the additional funds for savings or fun, such as that long-desired trip!
Step 5: Track Your Income (Yes, All of It)
This is a big one. Keep a record of all your earnings, particularly from side jobs. You may keep track of it with apps like Wave, QuickBooks, or even a reliable Excel sheet.
For instance, you earn $8,000 from selling customized artwork, $5,000 from tutoring, and $2,000 from babysitting. Knowing your overall income is the first step to accurately filing your taxes, so put it all in writing.
Step 6: Don’t Forget Deductions—They’re Your Best Friend
This is when taxation gets fun. Because deductions reduce your taxable income, you owe less money. Keep receipts for supplies, mileage, company expenses, and even your home office.
For instance, keep track of your petrol, auto maintenance, and even that $12 car wash if you’re driving for Uber. Keep those receipts for office supplies, software subscriptions, or advertising expenses if you’re a freelancer. Profits mount up quickly!
To discover more essential about tax, read American Tax Savvy: Maximize Your Refund, Deduct Your Bill
Final Thought
Look, managing taxes with multiple income streams might seem intimidating, but honestly, it is not entirely necessary to be overwhelming. With some smart changes up front- making adjustments to withholding, saving for taxes, tracking your income, and reaping those sweet deductions, you could get the knack for being a tax wizard in no time.
So, the next time you take your side work cheque, ask yourself, “Am I setting myself up to save at tax time?” A little preparation now can pay off later. Now, crush it—you’ve got this!
To discover more essential about tax, read Top 5 Tax Filing Software Options: Which One is Right for You?
Frequently Asked Questions(FAQ)
1. With multiple jobs, how can I know if I need to pay more or less in taxes?
– Simple! To check whether you’re on track, use the IRS Tax Withholding Estimator and look up your total income from all your jobs. Your paychecks will only be necessary if more is being withheld. You could have a large debt at tax time if it’s too low. Make that W-4 adjustment and maintain balance!
2. Does my income from other jobs have to be taxed?
– Yes, sadly, side job income is eligible for taxes. You are responsible for setting aside between 20 and 25 percent for Uncle Sam if taxes are not automatically withheld. Pro tip: to ensure you are prepared for the bill, look into a separate savings account for your tax savings.
3. If I have a side job, what should I deduct?
– Your best buddy is deduction! In most cases, it is deducted if it is for work. Remember your phone bill (if you use it for business), supplies, mileage, or even a home office. You’ll be glad you kept those receipts when tax time comes around.