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Working A Second Job To Make Ends Meet

Last updated 03/20/2024 by

Audrey Henderson
Whether you’re moonlighting at a second job or launching your own business on the side, you have decided to take on additional work in a bid to make more money, promote your career prospects, or both. While you are certainly to be applauded for your hard work and ambition, you might also want to exercise a bit of caution. Working two positions involves more than just long hours and more money. There are potential consequences associated with working more than one job. In some cases, those consequences can be severe enough that you need to call in reinforcements.

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Yes, It’s More Money, But . . .

Working a second job puts more money in your pocket, but depending on your circumstance, those additional earnings may come at a high cost. Many employers frown on their employees holding down multiple jobs. Others have outright banned the practice.
You may also run into possible confidentiality or conflict-of-interest problems if your second job is with a company that is a competitor or otherwise closely related to your main job. If you’re not sure about your company’s policy on moonlighting, find out BEFORE you take that second job.
It also makes sense that working a second job means less time for yourself, your family, and your social life. You may already struggle to make Susie’s soccer games or Jimmy’s hockey practice. Making an appearance in the stands when your kids play their big games will be even more of a logistical challenge if you take on a second job or launch your own side business after hours. Your spouse may take issue with your being away from home so much, too.

Possible Underpayment Penalties

The fact that you are holding a second job also presents tax implications. You should be clear on what you’re getting into tax-wise before you start a second job. Otherwise, you may find yourself in the middle of a very expensive tax mess.
If your second job is indeed a wage-paying position, your employer will almost certainly make deductions for federal and state income taxes, Medicare and Social Security. But unless you adjust your exemptions, those deductions will be made as if that was the only job you hold. You should estimate your total earnings from all your work-related income sources and adjust the exemptions on the W-4 forms at each of your employers accordingly. Doing this will help you to avoid tax overpayment, or worse, an underpayment that can result in a huge tax bill in April.
If you are launching your own business or working as a non-employee contractor, you are not off the hook when it comes to paying taxes. In fact, you will likely need to begin making quarterly estimated payments to avoid a big bill at tax time as well as a sizeable underpayment penalty.

A Higher Tax Bracket?

Surprise! Your second job may land you or your household in a higher tax bracket. Of course, this is not a reason to give up the earnings or relevant experience to be gained from holding a second job. But especially if the earnings from your second job or home business are substantial, you may find yourself in the unfortunate position of making JUST enough money to find that you have jumped to the next level of earnings, and that a significant proportion of those earnings are eaten up by federal and state income taxes.

Reduced Eligibility for Tax Breaks

Despite the talking points concerning “tax breaks for the rich,” Uncle Sam can actually be pretty stingy with high income wage earners. For instance, the additional earnings from your second job or side business may make you ineligible to establish a Roth Individual Retirement Account. If you were previously eligible for the Earned Income Tax Credit, your additional income may push you out of the eligibility range and result in you not qualifying for the credit anymore. Depending on how high your earnings are, your Social Security benefits may be taxed as well.

Don’t Go It Alone

Whatever you do, don’t entertain the idea of not reporting your additional income to State or Federal agencies. Remember, the IRS receives a copy of every W-2 and Form 1099 issued to you. If you are self-employed, your earnings may be a bit harder to track, but the IRS has ways to uncover your true financial status.You don’t need the headache of a huge fine or possible jail time just to avoid paying taxes on your second job.
Did you know that during the year that you reach full retirement age, the IRS deducts $1 for every $3 in earnings over specified income limits? A tax expert can help you determine if you are nearing those limits. Even if you’re used to handling your own financial affairs, taking on a second job or a side business may make it necessary to obtain professional help. A tax professional can also advise you on making the proper adjustments in your claimed exemptions or quarterly estimated payments to avoid nasty surprises at tax time.
By being proactive and seeking help when you need it, you can ensure that your second job or side business remains a source of additional income and further career opportunities, rather than becoming a major headache or tax nightmare.

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Audrey Henderson

Audrey Henderson is a Chicagoland-based writer and researcher. She holds advanced degrees in sociology and law from Northwestern University. Her writing specialties are sustainable development in the built environment, policy related to arts and popular culture, socially and ecologically responsible travel, civic tech and personal finance.

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