Just got a side job - w4 allowances section

Question

I recently started a full-time M-F job which has a total annual gross pay of just over 20k.

Now, I have been offered a "when-available" (tell them what days I'm available in a 7-day week and they schedule me if they have something open) game testing position.

As I work M-F full time at Job #1, I would only work for Job#2 (game testing) on Saturdays and/or Sundays if I want to and if there are shifts available.

Basically, I have to fill out a w-4 for Job#2 and I don't know what to claim in allowances.

For Job#1 I claimed a total of 2 (lines A & B). Line B because that was my only job at that point in time.

I was going to do the same for the w-4 for Job#2, but then I saw that it recommends (on the w-4 form) to claim 0 allowances on the least paying job's w-4 to avoid too little tax withheld.

I'm game for doing this, but just want to make sure that if I do, that means I won't be blamed for "too little taxes withheld" come tax season, and won't have to pay the government any money.

Is this true?

Answer 1

You have interpreted the instructions correctly.

The issue with two jobs at the same time, is that that second job will be taxed at the highest rate; but the second employer has no idea what the other position is paying you.

If you make enough to be in the 15% tax bracket for your main job that means: some of the money from each paycheck is taxed zero; some is taxed at 10% and the last dollars are taxed at 15%. But the second job should withhold for taxes to cover all the income at 15%.

To avoid problems you should look at the tax form you are filling out this year. Look at the total tax you paid. Not the refund or the amount you owed when you filed but your total tax paid. The government allows a safe harbor if you make sure that in 2016 you have the same amount withheld this calendar year. If that isn't enough, you will owe money in April 2017, but you will not have to pay a penalty.

After you have a couple of paycheck from your main employer, check to see that if you work the rest of the year at that same rate that the federal withholding will make the safe harbor. If you will make it, you don't have to worry about the penalty. If you will fall short, adjust the w-4 accordingly.

Answer 2

First, we need to be clear about what the allowances on your W-4 mean. The more allowances you claim, the lower tax liability it is assumed that you have, and they will take less tax out of your check. So claiming 2 allowances will result in a bigger paycheck and less tax withholding than claiming 0 allowances would.

If you claim 0 allowances, you are in no danger of having too little tax withheld; instead, that would result in the maximum tax withheld. So 0 allowances is certainly an option, if you want to play it safe.

This being your first year with these jobs, it's hard to know what to claim on your W-4. When you do your taxes next year, you can see if the withholding was too much or just right; if your refund is too big, you can increase your allowances for next year.

That having been said, I don't like getting big refunds; I'd rather have a bigger paycheck all year. If I were you, I'd probably claim 1 or 2 allowances at the new job, and adjust it next year if needed. At your income level, you aren't really in any danger of getting in trouble for having too little withheld.

Good luck with the new job. Game testing has always seemed like a dream job to me. :)