How to legally avoid tax with diversification?

Absolute beginner on taxation. However, after banging my head for few days I think I've got the answer of saving oneself from getting ripped off from the government. My assumption is that given the time you have and if possible you should be working in multiple companies rather than a single company. Let's say your paycheck is \$600K working in single company X. Using marginal taxation given below you would be paying \$186,071 tax per year. However if you could possibly split your time and work in six different companies with each company giving you \$100K paycheck per year, then you would be paying \$18020.76*6=\$108,124.56(that's like saving \$77k from taxes).Is this possible or government will sum up all the paychecks in a given year before taxing?

• The government doesn't care how you get your income, it just cares about your income. Jan 27 at 18:49
• If you are unable to see this doesn't work by walking through the 1040 instructions, which are massively dumbed-down in an attempt to get the US population to understand them (though apparently without success), no one is going to hire you at \$600k -- about \$30k is more likely, and then instead of worrying about progressive brackets you worry mostly about EITC RSC and maybe CTC and PTC phaseouts. Jan 28 at 4:30

Let's say your paycheck is \$600K working in single company X. Using marginal taxation given below you would be paying \$186,071 tax per year.

So far you are essentially correct. Many people get this part wrong because they see the 37% and think that all their income is taxed at 37%

However if you could possibly split your time and work in six different companies with each company giving you \$100K paycheck per year, then you would be paying \$18020.76*6=\$108,124.56(that's like saving \$77k from taxes).

Now you are running into a problem. Even if you could find a way to do this taxes don't work like this. The 1040 tax form you submit each April looks at all your income before you calculate one number for your income tax. The system doesn't care if you had one job for X months or one job for the whole year, or multiple jobs.

Is this possible or government will sum up all the paychecks in a given year before taxing?

Depending on how the income was divided over the year, you could be severely under withheld. If each company paid you \$50,000 a month for two months. Then each company would withhold federal taxes like you were making \$600,000 a year. But if you had multiple jobs at the same time, each company would see you as making \$100,000 a year and you would find that they under-withheld by \$77,000 for the year. The IRS would not be pleased. You would likely face tax penalties.

Note that the W-4 form that you would have to file with each company has a whole section that deals with having multiple jobs.

Step 2(b)—Multiple Jobs Worksheet (Keep for your records.)

If you choose the option in Step 2(b) on Form W-4, complete this worksheet (which calculates the total extra tax for all jobs) on only ONE Form W-4. Withholding will be most accurate if you complete the worksheet and enter the result on the Form W-4 for the highest paying job.

Note: If more than one job has annual wages of more than \$120,000 or there are more than three jobs, see Pub. 505 for additional tables; or, you can use the online withholding estimator at www.irs.gov/W4App.

Note: You used simplified numbers in this example, but your taxable income wouldn't be \$600,000. This is because you do have a standard deduction, or you could itemize. You could be making a 401(k) contribution. You could also be paying for your health insurance via your paycheck, in addition to an HSA or Flexible savings account.

• Summarizing: The taxes rates aren't calculated per job, they are calculated on your total income across all jobs and income sources. OP's scheme won't work.
– JohnFx
Jan 27 at 13:51
• In addition to income tax, Additional Medicare Tax is withheld by each employer on per-employer pay, but actually computed and owed on total pay making it more. OTOH the cap for Social Security employee withholding (currently 6.2% * 147k) is applied separately by each employer, but if the total across employers exceeds the cap you get the excess back as a refundable credit on your income tax. Jan 28 at 4:25