Your primary concern when you take up a second job is possibly paying off debt or meeting a savings target. The last thing you worry about now is how the work impacts the sum you pay in taxes for the year. But that error could cost you.
Here’s what you need to know about getting and a second job and how it will affect your taxes.
Getting a Traditional Second Job
If you work a second job withholding tax from your check from your boss, the best way is to say zero on your second paycheck.
However, consulting with the retention calculator to see if you need to change your withholding number is always a good idea.
Make sure to check to see if it will impact your state taxes, too.
Working as a Freelancer or Independent Contractor
When you work as a freelancer or as a contractor, things are going to be a little more complicated because you are responsible for paying taxes.
This self-payment means your employer won’t deprive you of any of the money. Through talking to an accountant or using a tax calculator you will decide how much you should set together to pay taxes each month.
A common thumb rule, though, is 25 to 30 percent of what you take home is what you are going to pay in taxes.
In addition to your income tax, you’ll also need to pay taxes on self-employment.
So, if you don’t set money aside, you could face a pretty heavy tax bill. You should either make payments quarterly or set aside this money.
Make the Most of Your Second Job
Taking a second job can be exhausting and tiring, and can not be a short-term option for reaching a financial target. But you have to make the most of the extra money.
When you can afford to cover your basic cost with only one job, it can be easier to cut your spending and stick to a budget — rather than attempting to juggle two jobs.
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