What are the pros & cons of taxes getting taken from 2 jobs paychecks?

Question

I work 2 jobs and I was wondering do I have to have taxes taken from both checks? & if I dont will I get a bigger refund check at the end of the year!

1 INCOME TAXED
Pros:
-More money now!
Cons:
-Pay more money @ the end of the year!

2 INCOME TAXED
Pros:
-Less taxes taken out at the end of the year!
Cons:
-None! !@^&#*@#

Please help! Thanks!

Answer 1

You probably won't get a bigger refund check at year end, if anything, you'll end up owing money. This is because neither of your 2 jobs knows about the other one, so they will figure your federal withholding based on the income you are earning from the one job. For example if you are working for 2 places, and make $25,000 from each, they are going to withhold from you based on $25,000 but you are going to be taxed on $50,000 in income. It's possible that your income earned in total could put you in a higher tax bracket, but your withholdings are based on being in a lower bracket. The only thing that might work in your favor would be if your W-2 wages were higher than $94,200 in 2006 and $97,500 in 2007. Those 2 numbers are the limit that you have to pay social security tax on. If you exceed those limits your employer is supposed to stop taking out social security tax (medicare tax still will be withheld as there is no limit for that), but with 2 employers, your W-2 wages in total might go over the limit, without either job by themself going over the limit. If your employers have together withheld to much in social security tax you can get it back on your 1040 as a credit, but remember all you're getting back is your own money.

Answer 2

The IRS taxes your overall earnings. It doesn't matter if you earn $50,000 at one job or $25,000 at two different jobs...your tax liability will be the same.

Tax liability is figured out when you fill out your 1040 form at the beginning of the year. It is the amount you should have paid Uncle Sam all year long. Throughout the year, your employer "withholds" money from your paycheck and sends it to the IRS on your behalf. If they send too much, you get a refund. If they don't send enough, you owe.

Let's say you earned $50,000 for the year causing a tax liability of $8,000. It doesn't matter if you had one job that withheld $10,000, two different jobs that both withheld $5,000 each, or one job that withheld $10,000 and a second job that withheld nothing, you will still get back a $2,000 refund.

So you see, the "pay more now and still have to pay more at the end of the year" isn't true. The more you pay the IRS(withhold) throughout the year, the more refund you get at the end of the year. The less you pay all year, the less refund you get.

My philosophy is, earn as much as you can and don't worry about taxes. In the USA, you never get into a situation where if you earn an additional dollar, your taxes go up by more than a dollar*. Earn as much as you can and let Uncle Sam have his share. I would love to have a $100,000 tax bill. That means I must have earned a ton of money :)

The biggest risk of having two jobs simultaniously was covered very well by other answerers. In summary, since each job withholds taxes based only on what you make at that job, they may not withhold enough to cover the fact that your income bracket is higher. The same is true for people that only work one job, but have lots of investment income. Your best bet is to estimate how much income you will have for the year and figure out what your tax liability will be. Use 2006 tax forms if you want. The answer will be close enough. Once you figure out your tax liability, make sure that the combind withholdings from both companies will exceed that liability. If not, ask them to withhold more by changing your W-4.

If what I said in the previous paragraph is not something you feel comfortable doing, you may want to seek help from a professional in your area. Many will do the calculation for you for free in the hopes of you using them in February to do your tax return. Simply bring them last year's tax return along with your latest paystubs.

Hope this helps!

* - There are exceptions where an additional dollar of income could cause more than a dollar of tax liability, Tuition and Fees Deduction is one example, but this is very rare.

Answer 3

First, you do not need to have taxes taken out of both checks; obviously, the more you pay during the year, the more you don't owe (or more you get back) in April. There are a few complications to consider: 1. Does either job put you above the Social Security taxable maximum (currently about $90,000)? If so, you will get an additional chunk back in April. 2. Do you expect any changes in your income stream or deductions (children, marriage, buy a house, etc) over the course of the year? 3. If you pay fewer taxes during the year, how would you use the money (investing the money would give you a stream of interest).

I would suggest you take a look at the IRS withholding calculator to see what they recommend (http://www.irs.gov/individuals/article/0,,id=96196,00.html). It's useful as a guide, but overall the answer just depends on whether in April, you'd like to get money or pay money.

Answer 4

I'm no tax expert, but I'd say you have to be a little careful about this one, otherwise you could get taxed on both, and still end up owing money at the end of the year. The problem is that the tax taken out of your paycheck is often a number automatically computed by your company's payroll program, based on what your projected annual earnings are--from that company only. If you are working two jobs, you may earn enough to potentially end up in a higher tax bracket, which means that the tax taken out of each individual paycheck (calculated on a smaller projected annual income tax bracket) put together may not be enough to cover your tax liability for the higher tax bracket you end up in. This could mean that you will owe more taxes at the end of the year anyway.

I'd speak with a tax and/or financial advisor about this.

Answer 5

If you have taxes withheld from both jobs, do not expect a bigger refund. You may have a balance due when you do your taxes, rather than a refund.

Many times people are shocked that they owe taxes at the end of the year when they work two jobs, even when they have taxes taken out. This is because each job withholds based on the tax bracket that you are in based on that job alone, but when you add together your income from both jobs, you are in a higher tax bracket.

You may have two jobs that place you in a 15% bracket, but when you add them together, you are actually in a 25% bracket, a big difference.

So do withhold taxes from both jobs. If you are going to jump to a higher bracket, you may add some extra withholding to one of the jobs so that you do not owe money come tax time.

Answer 6

Yes, you have to have taxes taken out of both. If you don't, and end up owing over $1000 for the year, you will probably be penalized in addition to whatever taxes you owe.

With two jobs, if you are working both of them at the same time, you run a risk of owing anyway at the end of the year.

Answer 7

The more you make, the more you pay in taxes. So if you exempt taxes from one of your jobs, prepare to pay a nice chunk of change for the year ends taxes...=)

Answer 8

2 jobs means 2 taxable incomes.

Not that hard to figure out.

Adjust your withholdings as you will, but robbing from Peter to pay Paul never works, unless you're Paul.

Answer 9

If a Democrat gets in, it won't matter. Almost all of it will be gone.