How does changing jobs or having multiple employers affect my withholdings?
As a result of having multiple W2 jobs (whether from working for more than one employer, or from changing jobs mid-year), taxpayers are often surprised at tax time by their lower-than-expected refund, or higher-than-expected amount owed figures. This is due to the withholdings logistics implemented by employers/payroll companies.
Withholdings can often be convoluted with multiple jobs because additional W2’s can put you into a higher tax bracket; and unless you provide information on your W4 form indicating multiple jobs, each employer will most likely withhold at lower tax rates since the other income is not known.
For example, the withholdings with one employer on $50,000 of income will be higher than the withholdings with two employers on $25,000 of income at each job. That’s because the one employer is aware of your higher tax bracket on $50,000 in earnings, versus the two employers withhold as though you only have $25,000 total income they each see.
This is common with employees such as dental hygienists who work for multiple dentists. Hygienists might make $20,000 from each of four different dentists. Each dentist’s payroll company withholds as though $20,000 is the total pay versus the actual $80,000 earned by the hygienist. So unless the hygienists adjusts accordingly, there’s often a shortage.
The way to mitigate this problem is to pay specific attention to your W4 forms. Page two of the instructions on this form is for taxpayers with multiple jobs.
You can also use the IRS Withholdings Calculator tool.
Or you can use the percentage method of withholding, which we discuss further on this page: click here.
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