After you start a part-time job, you may find your first paycheck is smaller than you expected because of deductions for taxes and withholding. Most of these part-time employee tax deductions are based on a percentage of your earnings and apply even if you work only a few hours each week. When your employer calculates income tax withholding, he bases the amount on the information you entered on your W-4 form when you started the job. If you believe your employer is withholding too much for a part-time job, or isn't withholding enough, submit a new W-4.
Just as if you were involved in full-time employment, your employer will calculate the amount withheld for taxes on your regular paycheck using your current wages and the information you provided on your W-4.
Taxes and Your Part-Time Job
Your employer is required to deduct federal taxes from your paycheck and may deduct state and local taxes as well, depending on the state or city in which you work. The three main deductions are for federal taxes. The percentage of taxes taken will depend on your income level and your filing status, i.e., whether you file single or joint with your spouse. The current tax brackets range from 10 percent to 37 percent for the 2018 tax year. These current brackets are different than 2017 brackets due to recent tax reforms. For 2017, tax brackets ranged from 10 percent to 39.6 percent.
In 2018, all employers must deduct 6.2 percent of your earnings from each paycheck for Social Security taxes and 1.45 percent for Medicare taxes. Your employer may lump these together and list them as FICA taxes on your pay stub. The employer is required to match this amount and forward the total to the Internal Revenue Service. The other major payroll deduction is for federal income tax withholding, and this one is often the largest deduction.
How Employers Calculate Withholding
Your employer calculates your income tax withholding based on an IRS formula that predicts how much in taxes you're likely to owe at the end of the year. The formula takes into account your previous earnings during the year, your earnings for the current pay period and the information you entered on your W-4 form, which includes your filing status and the number of exemptions you claimed. This formula does a good job most of the time, but it can't take into account every situation, particularly if you change jobs or have more than one job.
Make Your Own Calculations
If you want to see if your employer is withholding the right amount for income taxes, you can use the IRS Withholding Calculator (see Resources) to determine how much you'll owe next year based on your current income and withholding amounts. If you find your employer is withholding too much or too little, you can fill out a new W-4 form and submit it to your employer. To decrease the amount of your withholding, claim more exemptions. To increase your withholding amount, claim fewer exemptions. You can download the form from the IRS website. You can also go online and calculate your part-time income with a tax calculator.
Employer Doesn't Withhold Any Taxes
If you have a part-time job where your employer doesn't withhold any payroll taxes, the likely reason is that he classifies you as an independent contractor rather than a regular employee. Independent contractors are different from employees in that they aren't under the direct control of the employer; they choose their own schedule and provide their own equipment. If you have to report the income at tax time, you'll owe both the employee's and the employer's share of Social Security and Medicare taxes on the income, which is double what an employee would pay.
- IRS: Publication 15, (Circular E), Employer's Tax Guide
- IRS: Tax Withholding
- IRS: Independent Contractor (Self-Employed) or Employee?
- Social Security Administration: OASDI and SSI Program Rates & Limits, 2018
- IRS: Revenue Procedure 2017-58
- IRS: Withholding Calculator
- Forbes: IRS Announces 2018 Tax Rates, Standard Deductions, Exemption Amounts And More