Hello and good afternoon, Trevuchet!
Based on the information you provided, I would suggest a couple possible steps you could take to help to help reduce or potentially elimnate your tax bill, and ensure you will not owe additional penalties.
- You will want to check your W-4 and be sure that you have selected to be treated as single or married filing separate as your filing status in step 1c. This will cause withholdings to be at a slightly higher rate than if you select married filing joint and it does not impact the status you will be using on your actual tax return.
- You can mark the multiple jobs box in step 2, this will cause a slightly higher withholding as well.
- I would suggest carefully looking at step 4, where you can report additional income to be take into consideration or ask for an additional amount to be withheld out of each pay period if desired.
- To avoid the underpayment of tax penalties, you will want to follow the IRS "safe harbor" methods for determining whether you are subject to a penalty. If you meet one of these safe harbor amounts, the IRS won't charge an estimated tax penalty, even if you owe more than $1,000 at the end of the year. You will need to pay 90% of the tax you owe for the current year by making timely quarterly estimated tax payments or through paycheck withholding. Or pay 100% of last year's tax bill of the tax shown on your prior-year tax return before applying estimated payments, withholding, or refundable tax credits. If your adjusted gross income is more than $150,000 (or $75,000 if you're married and file a separate return from your spouse), the safe harbor is 110% of your prior-year tax.
You also mentioned that you do side gig jobs that add up to somewhere between $10,000 and $20,000 in additional income that have no witholdings taken out for taxes This is normal for this type of income because it is treated as contracted or self employment income. In this situation, it is usually best, and often required, that you make quarterly etimated tax payments. The IRS generally expects that you will pay your taxes as you go throughout the year by making quarterly estimated tax payments based on your total earnings, after expenses for each quarter.
Here are a few links to articles ,and tools that you may find helpful.
Thank you for joining us today and please have a great rest of your day!
Terri Lynn, EA
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Terri Lynn
