How to set up W-4 for married filing jointly: 1 spouse is fulltime, the other has 1 pt and a side gig (self-employed).

[glancees]

My spouse has a full-time job (makes over 100K). I have a home business (<10K/year) and I just started a part-time job (~$23K/year).

We have 1 dependent under 17 and an 18 year-old and 20-year-old old that live at home, whom we support.

We have a mortgage and make 10% contributions to charity.

What is the best way to set up our W-4s so we don't owe taxes in April?

Getting some back would be awesome, but the priority is to not have to pay more than what is being automatically taken out from each check.

[Zachary_W]

You should report any additional income earned from a second job on the highest earners Form W4 and increase the withholdings in the extra withholdings section of the Form W4. You will locate the appropriate amount in the worksheet for multiple jobs found in the instructions. 

For married taxpayers, coordinating the withholdings is essential, given the potential combined income to affect tax brackets and tax liabilities. The goal is to withhold enough to match your tax liability, avoiding both a large tax bill and overpaying, which effectively gives the government an interest-free loan.

Key Steps to Adjust Withholdings

To ensure you and your spouse do not owe money each year:

1. Understand Your Tax Situation
   • Combined Income and Filing Status: Most Couples benefit from filing jointly, which doubles certain deductions. However, calculate both joint and separate filing options to determine the most advantageous approach.
   • Deductions and Credits: Account for eligible deductions (e.g. mortgage interest, charitable contributions) and credits (e.g. Child Tax Credit) that reduce taxable income.
   • Use the TurboTax Tax Withholding Estimator.
2. Complete and Update Form W-4
   • Submit New Forms to include the Multiple Jobs Worksheet: If both spouses work, use the Multiple Jobs Worksheet to coordinate withholdings. This prevents under-withholding, which can lead to a tax bill. For example, if both earn similar amounts, check the box on Line 2c of Form W-4 to indicate this, ensuring proper withholding.
   • Additional Withholding: Use Line 4c on Form W-4 to request extra withholding if you anticipate owing more due to non-wage income or other factors. This can help cover potential shortfalls.
3. Review and Adjust Periodically
   
   • Annual Review: Check withholdings at least once a year, especially after major life events. The IRS recommends a "Paycheck Checkup" to ensure withholdings align with your tax liability.
   • Monitor Paystubs: Regularly review paystubs to confirm correct amount is being withheld.

Additional Resources

• IRS Publication 505: Provides detailed worksheets and examples for tax withholdings and estimated tax.
• Form W-4 with Instructions plus Multiple Jobs Worksheet.

Have an amazing day! Zachary W (CPA 9+ years)
I would love a thumbs up + Mark the post that answers your question by clicking on "Mark as Best Answer"

[glancees]

Thank you, this is helpful. We used the IRS multiple jobs worksheet and table and found that the amount at the intersection of both jobs is 6270. We did the calculations on the worksheet and ended up with $242 on line 4. We are just confused if this is tax that is in addition to what is already being withheld on the higher income or if we subtract what is currently being withheld and put that as the additional to be withheld (on line 4c of the W-4).

To put it another way: is that $6270 the tax on all $133K of income or is it the tax on just the $23K?

Part 2 of our question: will this additional withholding take care of self-employment tax or should we be arranging for paying quarterly taxes for that income, as well?

Part 3 (it's ok if you don't know this answer, as this forum is about W-4): what do we do about state taxes?? We are in Oklahoma. Is there a way to do the same type of calculation for state taxes?

[Zachary_W · Accepted solution]

1. Line 4c on the W-4 is for "extra withholding" per pay period. The $6270 represents the estimated additional tax you might owe for the year due to having multiple jobs, which can push you into a higher tax bracket or reduce deductions. The $242 is in addition to what's already being withheld based on your other W-4 inputs. It doesn't replace the current withholdings; it supplements it to account for the extra tax liability from multiple jobs. The $6270 isn't the tax on the full $133K of income it is the tax on the additional $23K of income.

2. The $242 additional withholding on your W-4 is for Federal income tax, not self-employed tax. You should arrange for quarterly estimated taxes to include the 15.3% for self employment tax. 

3. State Taxes in Oklahoma: Oklahoma doesn't have a specific multiple jobs worksheet, but you can estimate additional state tax using their rates (0.25% to 4.75%) on your income. You'd need to estimate your state tax on the $133K, subtract what's already being withheld, and divide the remainder by your pay periods to add to your state withholdings on Form OK W-4. 

Additional Resources

• IRS Publication 505: Provides detailed worksheets and examples for tax withholdings and estimated tax.
• Form W-4 with Instructions plus Multiple Jobs Worksheet.
• Form OK W-4 Packet

Have an amazing day! Zachary W (CPA 9+ years)
I would love a thumbs up + Mark the post that answers your question by clicking on "Mark as Best Answer"