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A few weeks ago I asked a question about paycheck withholdings because my wife started several part-time jobs with variable demand and therefore variable income.

Considering we filled in 0 exemptions on all her new jobs' W-4s, is it possible for me/my wife to make punctual contributions to the IRS using our SSNs? For example, at any given date I decide to pay a given amount to the IRS so that those taxes will count for next year?

One of the options I have instead is to change my own (higher income) W-4 to adjust our joint taxes. However, how often can I do that? Can I change my W-4 several times a year?

Thanks in advance,

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    You can file Estimated Taxes, usually quarterly.
    – keshlam
    Aug 2, 2016 at 19:34
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    Thought the other 2 questions answered your concerns. Why do you think you can't get your tax paid close enough via withholdings that you need to either pay more or keep adjusting?
    – JTP - Apologise to Monica ♦
    Aug 2, 2016 at 20:30

1 Answer 1

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I will answer this question broadly for various jurisdictions, and also specifically for the US, given the OP's tax home:

Generally, for any tax jurisdiction

If your tax system relies on periodic prepayments through the year, and a final top-up/refund at the end of the year (ie: basically every country), you have 3 theoretical goals with how much you pre-pay:

  • Prepay at least as much as you need to, to avoid penalties.
  • Prepay as little as possible, so that you can earn income off the saved prepayments during the year. Remember - a tax bill at the end of the year means you held onto your money for as long as possible (which is good), and a tax refund at the end of the year means you were lending it to the government for free (which is bad).
  • Save as much you need to, in risk-free savings, every paycheck, so that at the end of the year you can make the final top-up payment without incurring additional penalties for paying late.

Specifically, for the U.S.

All information gathered from here: https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes. In short, depending on your circumstance, you may need to pay quarterly estimated tax payments to avoid penalties on April 15th. Even if you won't be penalized, you, may benefit from doing so anyway (to force yourself to save the money necessary by April 15th).

I have translated the general goals above, into US-specific advice:

  • Your employer will withhold taxes on each of your paychecks. However, particularly if you work multiple jobs, these withholdings may not be enough to avoid penalties. Particularly, penalties may apply if (1) you owed any tax in the prior year; (2) You owe more than $1,000 in tax this year; (3) You paid less than 90% of the current year taxes you owed, in the current year; and (4) You paid less than 100% of last year's taxes, in the current year. This generally means that as long as your withholdings in the year are at least as much as last year's total taxes, then penalties will likely not apply. If that is not the case, you may need to make additional quarterly estimated tax payments (see the link).
  • If you make unnecessary quarterly tax payments [unnecessary meaning that paying them will not eliminate any potential tax penalties at the end of the year - see note above], you are losing out on the ability to earn interest on that money before April 15th of next year.
  • If you determine that you don't need to make quarterly tax payments, make sure you save money throughout the year to make your final payment on April 15th. If you forget about this, you run the risk of over-inflating your sense of your after-tax take home pay, and your living expenses may rise above what you can actually afford. Successful budgeting should include your true after-tax income, which includes saving for a final year tax payment, if relevant.
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  • Does condition (4) mean that when you filed your return this year, as long as you paid the full amount due (for last year's taxes) with that return, you shouldn't be subject to penalties next year?
    – Dan Henderson
    Aug 23, 2016 at 16:29
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    @DanHenderson I will quote directly from the IRS source I provided above [emphasis added]: "Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller." I make no claims about special circumstances which may override that rule, not listed there directly by the IRS.
    – Grade 'Eh' Bacon
    Aug 23, 2016 at 16:36
  • Thanks, I pulled up the link and eventually found the clarification that I was looking for: the "100% of last year's taxes, in the current year" does refer specifically to your withholdings, and is not talking about simply having satisfied your prior year's tax liability in general. The way it's worded in your answer, though, ("You paid less than 100% of last year's taxes, in the current year"), seemed to allow for that interpretation.
    – Dan Henderson
    Aug 23, 2016 at 16:57
  • For multiple employers, unless you adjust W-4 with at least one of them to decrease allowances or directly increase withholding, they will probably withhold too little income tax because of progressivity. However, if your total income across multiple employers exceeds the Social Security cap ($118,500 for 2016) they will withhold too much for SS and you count the excess as a payment on your income tax, and specifically as withholding for computing the form 2210 penalty, see instructions line 6.
    – dave_thompson_085
    May 31, 2017 at 23:10

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