Filling out W4's becomes tricky when there are multiple jobs, and more so when the jobs have very different wages, or are bursty. Is there anything wrong with having the withholdings be low, and then paying estimated taxes each quarter?
Details:
One spouse has the main wage-earning job (over 90% of income) and it fluctuates a little bit. Its W4 is fine. The other spouse has a very part-time job that pays anywhere from $0 to $1000 a month. The W4 for the part-time job was hastily filled out in a way that basically results in no withholdings.
As I understand it, the recommended path here is to have the small second job have a fixed withholding taken out every month (Federal W4, step 2
option (b)
). However, it is hard to know ahead of time what to put there because the income is so inconsistent.
Is there anything wrong with leaving the W4 as it is and just paying estimated taxes each quarter? (Basically filing estimated taxes like the second job was a 1099) That way there is no need to predict what the income will be on the W4. (This would be for both Federal and Oregon State taxes).
For example
If in April through May the second job payed $500, and the yearly income is projected to reach to the 22% tax bracket, then Q2 federal estimated taxes could be payed as 22% * $500.