While I can't currently locate the IRS document online, I believe if you earn less than $12,000 a year you are exempt from federal tax withholding.
If you have multiple jobs, you fill out a W4 at your highest earning employer declaring the income from other jobs to have the appropriate amount of taxes withheld.
@chiefone4u wrote:While I can't currently locate the IRS document online, I believe if you earn less than $12,000 a year you are exempt from federal tax withholding.
If you have multiple jobs, you fill out a W4 at your highest earning employer declaring the income from other jobs to have the appropriate amount of taxes withheld.
This link >>> https://www.irs.gov/individuals/tax-withholding-estimator <<< will help you figure out how to fill out the W4 for your highest paying employer.
When more than one source of income is involved (including in a jointly filing household), it is very common for withholdings to be incorrect. By default and filling in a Form W-4 as written in these cases, Job B's payroll amounts will be based solely on earnings at Job B, and not be based on Job A plus B. You can elect to have either a fixed (or additional) dollar amount or percentage taken out rather than what is calculated based solely on your filing status, exemptions, current earnings (on that payroll check), and pay frequency.
For simplicity, let's say that you are a single person and have a full time primary job paying $85,525 per year. You then take a part time job earning $10,000 a year (roughly 12 hours or so a week at $15/hr). Full time job taxes you as though you make $85,525. Part time job taxes you as though you make $10,000 a year, which places you under the federal poverty level and would result in little or no federal taxes being deducted from your checks.
However, the federal tax rates for a single person are 10% up to $9,875, 12% for the income from $9,876 to $40,125, 22% for the income between $40,126 and $85,525, 24% for the income from $85,526 to $163,300, on and on until the 37% bracket. So that $10k part time job is being taxed at the bottom of the chart while it actually should be taxed at the 24% rate so depending on how you fill out your W-4 you will have likely underpaid federal taxes somewhere between $1000 and $2400 for the part time income.
I grossly simplified that example just to show where the issue is with more than one income; the actual numbers will likely be far different as you will either have standard or itemized deductions reducing your taxable income, among many other factors that ultimately determine the amount of tax owed. Also important to note that in the rates above, someone with $100,000 of adjusted taxable income for example is not paying 24% federal tax on that full amount, only on the $14,475 of income above the lower tiers - anyone with an adjusted taxable income of $9876 or $1,000,000,000,000.00 is still paying 10% for that first $9875.
@babbles wrote:Thanks for the replies no, that is my only employment, sorry for confusion! I am married filing jointly
In that instance your spouse should report your income on their W4 if their income is the larger income.
The link I shared above allows you to put both partners income in to calculate how to fill out the new W4's (they were changed in 2020).
In the case of 1099's there is a minimum dollar amount (I believe it is currently $600) under which you may not receive a 1099 in which case it's up to you to voluntarily report it. In practice a lot of people I know don't but different issue.
1099's aren't a death sentence for a mortgage but it's basically 2 years of tax returns to prove income whereas as a W2 employee I can do that with 2 paystubs. Having been on both sides of that coin there's plusses and minuses to getting paid via 1099, you can do a lot of catchup in solo 401K's for example for retirement savings if you have enough self-employed income and you can deduct certain business expenses which may defray some of your regular expenses too, but on the flipside it's a lot more documentation and therefore onerous for things like mortgages.
