So, any income above $9000 will be taxed at 1.85%.
How are you currently paying for any state tax, if some of your state retirement income may be taxable? I have a feeling they are not withholding any state tax on that side job pay, which may push you above $9000 and then owe state tax on the difference. You may want to look at your numbers and see if you have to tell that employer to withhold at least 1.85%
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