I'm starting a second job that's asking me to fill out a W-4. I have been self-employed with a highly variable, small income, and I receive a 1099 from it -- I don't think they are withholding from my paychecks. Should I still report this self-employed gig work as a "second job" on my W-4? Thank you for your help!
No, 1099 income would go to "Other Income" (line 4a on form W4). You can also use this IRS W4 estimator tool to help you figure it out.
"Job" is where you're paid salary, and the employer makes tax withholding for you.
If you go to the page 2 of the W4 form, there are very detailed instructions on what to do with regards to self-employment income.
I am confused about the W-4 page 2 instructions for Line 4a. It says, “You shouldn’t include income from any jobs or self-employment.” (Emphasis mine) What do you think they mean by that? Is it a mistake? Apr 19 at 14:55
@BenMiller-RememberMonica Why do you think it's a mistake? That line is labeled "Other income (not from jobs)". It's where you enter investment income. Step 2 is where you deal with multiple jobs, which includes self-employment.– BarmarApr 19 at 15:14
@Barmar No, Step 2 is not for self-employment income, which this answer correctly says. Instructions for self-employment say, “If you want to pay income and self-employment taxes through withholding from your wages, you should enter the self-employment income on Step 4(a).” But then later the instructions for Step 4a say, “You shouldn’t include income from any jobs or self-employment.” This is what I find confusing, and I think the Step 4a instructions are mistaken when they tell you not to include self-employment income. Apr 19 at 15:34
1Thanks so much for your reply! I wanted to ask what you thought of mhoran_psprep's suggestion about either including gig income into the W-4 or paying estimated taxes. The trade-off for putting my gig income as "Other Income" would be having to pay quarterly estimated taxes, right? This is all very new to me, so thank you again for the help!– MarigoldApr 19 at 17:23
@Marigold my personal opinion is to keep it simple, guesstimate on the higher end and use withholdings. But it also depends on your cashflow, on how wide the range of variance is, there's really no one size fits all solution. Apr 19 at 17:29
I have been self-employed with a highly variable, small income, and I receive a 1099 from it -- I don't think they are withholding from my paychecks.
If you are getting a 1099 from them then they haven't been withholding Federal and state income taxes, and they haven't been withholding for Social security and medicare.
Should I still report this self-employed gig work as a "second job" on my W-4?
The purpose of the 2nd job section is if you have two jobs or your spouse has a job. This is an attempt to make the withholding more accurate.
Your situation is different, you have self employment that doesn't have withholding, plus you are responsible for the self-employment tax.
You can either try to include your gig income onto the W-4, which is discussed in the self-employment section of the instructions. Or you may find that filing estimated taxes helps.
From the W-4:
Self-employment. Generally, you will owe both income and self-employment taxes on any self-employment income you receive separate from the wages you receive as an employee. If you want to pay income and self-employment taxes through withholding from your wages, you should enter the self-employment income on Step 4(a). Then compute your self-employment tax, divide that tax by the number of pay periods remaining in the year, and include that resulting amount per pay period on Step 4(c). You can also add half of the annual amount of self-employment tax to Step 4(b) as a deduction. To calculate self-employment tax, you generally multiply the self-employment income by 14.13% (this rate is a quick way to figure your self- employment tax and equals the sum of the 12.4% social security tax and the 2.9% Medicare tax multiplied by 0.9235). See Pub. 505 for more information, especially if the sum of self-employment income multiplied by 0.9235 and wages exceeds $160,200 for a given individual.
Because your gig income is highly variable the quarterly estimated taxes might be the way to go. But you also describe it as small, so you might find that you can just guess high on the W-4 and call it good.
Here is where the IRS discusses estimated taxes. They also discuss how to Manage Taxes for Your Gig Work
If you earn money for gig work as an independent contractor, you may have to pay quarterly estimated taxes. You can avoid a penalty by paying enough tax on time.
Do you work as an employee and do gig work on the side? You may avoid making estimated tax payments on your gig income by withholding more tax from your employee paycheck. Use the Tax Withholding Estimator. Then fill out a new Form W-4, Employee’s Withholding Certificate and give it to your employer.