Working a Seasonal Job This Year? Don't Let Taxes Surprise You!
If you are going to be working a seasonal job before the end of the year, don’t let taxes take you by surprise. Earning extra income can affect your taxes in a lot of different, and sometimes unexpected ways. One thing that shouldn’t come as a surprise is owing more tax!
If the job will be taking out taxes and giving you a W-2, you can use the IRS’s withholding estimator Visit https://www.irs.gov/individuals/tax-withholding-estimator to figure out how to complete your W-4 Form.
The W-4 is the form you give your employer when you start a job, which tells the employer how much federal income tax to withhold from your paycheck.
If the job isn’t going to take taxes out, there are two things you should think about: First, are you going to be able to put aside enough money to cover the taxes? Second, are you getting misclassified?
If taxes aren’t taken out of your pay, you need to plan on how you are going to be able to afford to pay a bunch of different taxes. There are federal, state, and local income taxes, and there is also a federal social security tax. Altogether, these taxes can be up to 25% or more of what you make.
If taxes aren’t being taken out, try to save a quarter of what you make in order to pay these taxes. If you need all your earnings to pay the bills and you are not able to save, don’t worry, the IRS has programs for folks who can’t afford to pay their taxes.
If it’s just a job to you, and not your own business, there is a good chance that taxes should be taken out of your pay and that you are being misclassified.
Misclassification is when employers treat their employees like independent contractors and don’t withhold taxes. One of the biggest impacts of misclassification is that it can lead to you owing more tax, because the federal Social Security tax is twice as much for independent contractors as it is for employees.
Misclassification can also affect your ability to get unemployment compensation and other employee rights and benefits.
You can learn more about misclassification at our website: https://philalegal.org/resources/worker-misclassification
Questions? Problems? Contact us to see if we can help! Call our intake at 215-981-3800 between 9:30am and 12pm Monday through Thursday or apply online at https://philalegal.org/apply