I am a 1099 contractor. My spouse is starting a new W-2 job. The federal W-4 she is filling out has a worksheet for two-earners which asks about "wages from the lowest paying job" and "wages from the highest paying job" to calculate additional withholding. My understanding is that as a 1099 contractor, I have no wages, only business income. How does that impact how we fill out this worksheet? My income is higher than her wages, so does my income count as "wages from the highest paying job"? Or does my income not count for this worksheet, since it is not wages?
The W-4 your spouse is filling out for her employer does not go to the IRS. It just tells the employer how much tax to withhold from her paycheck. If she does not have enough withheld, then you could end up owing. So you do not want her income treated as if it is the only income being received.
Yes ... the worksheet needs to take into consideration your income in her calculations.
Also see:
<a rel="nofollow" target="_blank" href="https://www.irs.gov/newsroom/irs-statement-withholding-for-2018">https://www.irs.gov/newsroom/irs-statement-withholding-for-2018</a>