(NewsNation) — Side hustles have become a necessity for many Americans, and there are several ways a second job can impact your taxes.
More than 8.6 million people in the U.S. held multiple jobs in January, roughly 5.3% of the workforce, according to the Bureau of Labor Statistics.
Whether you moonlight as an Uber driver or tutor on the side, the IRS requires you to report and pay taxes on that income.
Here’s what to know about filing your federal tax return if you work multiple jobs,
Do you have to file multiple federal tax returns?
No, you do not file multiple federal tax returns for each job separately. The IRS only requires one tax return per person, but you do have to include any income you earn, whether it’s from a primary job or a side gig.
Let’s say you’re a school teacher but occasionally drive for Uber on the weekends: You’ll need to pay taxes on both sources of income.
But even though there are two income streams, you can report them on a single federal return. Your tax bill is based on the total amount of money you earned, not the number of jobs you have.
Are there different tax forms for multiple jobs?
While you’ll only file one federal tax return, the way you report that income varies depending on the type of jobs you have.
There are a few tax forms you may need:
- Form W-2: Also known as a “Wage and Tax Statement.” This shows how much an employee made and how much tax the employer withheld. The form is sent to you by your employer in January, and the IRS also receives a copy.
- Form 1099-K: This will show payments you received from third parties or marketplaces, which includes money you earned through ridesharing apps like Uber or Lyft.
- New this year: Taxpayers who received more than $5,000 in payments for goods and services through an online marketplace or payment app in 2024 will receive a Form 1099-K. Keep in mind: You still have to report any income on your tax return, even if you don’t receive a Form 1099-K.
- Form 1099-NEC: This is for pay from independent contractor jobs, sometimes known as self-employment income or freelance work. Since taxes aren’t deducted from their pay, most freelancers are expected to make quarterly tax payments four times a year known as estimated taxes. Find out if that applies to you here.
When it’s time to file your taxes, you will use the various forms to determine the taxable income you have to report.
How does withholding work with multiple jobs?
Employers withhold a portion of each worker’s paycheck for federal income taxes throughout the year. That amount is determined by how much money you make and the information you provide on your W-4 form.
The W-4 form requires you to provide information about your expected filing status, family income from other jobs and number of dependents to make sure the right amount of tax is being withheld from your paycheck.
If you have the correct amount of income tax withheld, then you shouldn’t owe taxes or get a big refund when you file your return.
However, withholding can be confusing when you have multiple jobs because a side gig can change your tax liability. If your W-4 form is outdated and doesn’t reflect your side income, then you could be left with an unexpected tax bill at the end of the year.
As an employee, you can submit a revised W-4 at any point during the year, so make sure it’s up to date if you have a side gig.
In general, the IRS says you should increase your withholding if:
- You hold more than one job at a time, or you and your spouse both have jobs
- You have income from sources other than jobs or self-employment that is not subject to withholding
“If you do not make adjustments to your withholding for these situations, you will very likely owe additional tax when filing your tax return, and you may owe penalties,” according to the IRS.
You can use the IRS Tax Withholding Estimator to figure out how to complete your W-4.
Other tax tips if you work multiple jobs
There are a few things to keep in mind that could lower your federal tax liability if you work multiple jobs.
- Track your expenses: Side hustles or self-employment often means more possible deductions. That’s why it’s important to keep track of all your expenses and receipts. When you go to file, you may reduce your tax liability by itemizing your deductions, but you may be asked to back it up with proof.
- Be careful of Social Security taxes: The maximum earnings subject to Social Security tax is $168,600 in 2024. Any earnings above that threshold aren’t subject to Social Security tax, so if you have a side hustle, make sure your employer is aware and not withholding too much.
- Pay attention to your tax bracket: Having multiple jobs could push you into a different tax bracket. But remember: When your income jumps to a higher tax bracket, you don’t pay the higher rate on your entire income. Instead, you are taxed only on the part that is in the higher bracket.