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Multiple Jobs: Be Prepared for Tax Surprises

by | Aug 11, 2023 | Taxes | 0 comments

Before the holiday calendar fills up, make room for one more conversation: Am I missing opportunities to lower this year’s tax bill?

You don’t need every tax document in hand to start. Gather your latest pay statements, investment activity, retirement contributions and planned charitable gifts, then ask your tax professional which decisions deserve attention now. Some opportunities require action before December 31; others, including eligible IRA and HSA contributions, may remain available into the following year.

The goal is a coordinated plan—not a last-minute scramble or spending money simply to get a deduction.

1. Put investment losses to work thoughtfully

If an investment in a taxable account has lost value, selling it may create a capital loss that can offset capital gains. If losses exceed gains, married couples  and single individuals are limited to deducting a maximum of $3,000 of the excess every year. $1,500 if  filing married filing sperate. Unused losses can carry forward to later years. See IRS Topic 409, Capital Gains and Losses. 

Watch the wash-sale rule: buying substantially identical stock or securities within 30 days before or after a loss sale can disallow the deduction. The IRS illustrates this in its wash-sale guidance. Before selling, ask your tax professional and financial planner to review the tax impact alongside your investment goals.

Ask before year-end: Do my realized gains, available losses and prior-year loss carryforwards suggest any trades worth considering? 

2. Review when income and deductions will count

Timing can affect which year income and expenses appear on your return. Under the cash method, income is generally reported when constructively received and expenses are generally deducted when paid, subject to applicable rules. The accrual method works differently. See IRS Publication 538, Accounting Periods and Methods. 

Ask your tax professional to compare this year’s expected income and deductions with next year’s before accelerating a payment or discussing a permissible change in income timing. Do not assume you can move income into January simply because you prefer next year’s tax treatment, or that paying an expense early automatically makes it deductible.

Ask before year-end: Would changing the timing of an otherwise planned transaction help my overall tax picture, and what rules apply?

3. Make charitable giving intentional

If giving is already part of your year-end plans, consider the tax rules before choosing the amount, asset or timing. Beginning in 2026, eligible married couples who do not itemize may deduct up to $2,000 of qualifying cash gifts, or $1,000 if filing single. Noncash  gifts & gifts to donor-advised funds do not qualify for this particular deduction. See IRS Publication 6196, Charitable Contribution Deduction Tips for Non-Itemizers.

For taxpayers who itemize, a new 2026 floor generally allows a charitable deduction only for contributions exceeding 0.5% of adjusted gross income, with additional limitations potentially applying. That makes it worth discussing whether to combine planned gifts into one year or donate appreciated investments rather than cash. If the taxpayer itemizes, they lose the benefit of the $2,000 ($1,000 if single) deduction, regardless of if their charitable deduction is limited by the 0.5% floor.

Confirm the recipient qualifies and keep the required records. A gift of $250 or more generally requires a contemporaneous written acknowledgment from the charity. See IRS Topic 506, Charitable Contributions.

Ask before year-end: How should I complete my planned gifts, and what documentation should I obtain?

4. Check your retirement contribution room

Start by reviewing what you have contributed through payroll and whether increasing your contributions fits your budget. For 2026, the employee contribution limit for 401(k) plans is $24,500, with additional catch-up contributions available to eligible older participants. If you’re age 50 or older, ask your tax professional which catch-up provisions apply to your 401(k) and IRA, and how your salary affects the applicable rules. Some catch-up contributions may not be deductible.

Traditional IRA deductibility depends on factors including income and workplace retirement-plan coverage. See the IRS announcement of 2026 retirement contribution limits.

Not every retirement contribution lowers today’s tax bill. Traditional retirement contributions may offer a current tax benefit; Roth IRA contributions are made with after-tax dollars and do not generate a deduction. For workplace plans, check remaining payroll dates and plan-specific requirements now rather than assuming an IRA deadline applies. Eligible taxpayers generally have until April 15, 2027, to make 2026 traditional or Roth IRA contributions. See Fidelity’s 2026 IRA contribution deadline guide.

Ask before year-end: Should I adjust remaining payroll contributions, and would a deductible IRA contribution fit my situation?

 5. Revisit your health savings account (HSA)

If you are eligible to contribute to a health savings account, check whether you have unused contribution room. The 2026 base limits are $4,400 for self-only coverage and $8,750 for family coverage under IRS Revenue Procedure 2025-19.

HSA contributions made outside pre-tax payroll may qualify for a federal income tax deduction. Contributions through payroll and from your employer must also be included when reviewing your limit, and eligibility matters—especially if your health coverage changed or you enrolled in Medicare. Eligible taxpayers generally have until April 15, 2027, to make 2026 contributions. See IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans.

Ask before year-end: Am I eligible for additional contributions, and how much room remains after all funding sources are counted?

Start with a conversation

You do not need to pursue every strategy. Bring your tax professional a current snapshot and ask which actions fit your circumstances, which require completion before December 31, and which can wait until the contribution deadline. Coordinate any investment decisions with your financial planner.

A thoughtful review can help you identify opportunities without letting taxes drive decisions that do not otherwise make sense. Start now so there is time to ask questions, confirm the rules and act deliberately.

This article provides general educational information about federal taxes based on sources reviewed November 6, 2026. It is not individualized tax, legal or investment advice. Eligibility, limitations, state tax treatment and deadlines vary. Consult your tax and financial professionals before taking action.

Working more than one job can help maximize income, but also potentially create a tax surprise. Here are several items to be aware of:

  • Social Security Surprise: As a full-time employee, the most you’ll have to pay in Social Security taxes in 2023 is $9,932. The problem is each employer you work for will withhold Social Security taxes up to this threshold.

Example: Jane Smith works two jobs. Employer #1 has withheld $6,000 in Social Security taxes so far in 2023, while Employer #2 has withheld $4,000. Jane has already paid more than the annual limit of $9,932 in Social Security taxes for 2023. Jane will get back the excess Social Security taxes, but she’ll need to wait until she files her 2023 tax return in 2024.

What you can do: A method to avoid the over withholding of Social Security taxes is to have your second job be as a contractor. This way there will be no withholding, but the downside is that you will end up responsible for the income, Social Security and Medicare taxes yourself. On the flip side, the extra withholding may be appreciated as two jobs as an employee can commonly result in a under withheld situation.

  • Phaseout Surprise: As your income increases, the number of deductions and tax credits available to you will get smaller as benefit phaseout limits are reached.

Example: The Child Tax Credit provides a $2,000 tax credit for each qualifying child. You don’t qualify for this credit, however, if you file a joint tax return with taxable income above $440,000, or are single and file a return with taxable income above $240,000.

What you can do: Certain deductions and adjustments can help decrease taxable income below a phaseout’s limit. This will potentially allow you to still take advantage of a tax break, such as the Child Tax Credit.

  • Benefits Surprise: Every retirement and medical account limits how much you can contribute annually. If you exceed these limits, you may have to pay taxes twice on the same income.

Example: The 401(k) contribution limit in 2023 is $22,500. You inadvertently contribute $27,500. The first $22,500 of contributions won’t be taxed until you start making withdrawals after you retire. The excess $5,000 contribution could be taxed twice – you must include the $5,000 as taxable income on your 2023 tax return; you’ll also pay taxes on that $5,000 when you withdraw it from your 401(k) after you retire.

What you can do: Correct any over-contribution before filing that year’s tax return. Up-to-date record keeping throughout the year can alert you to when you’re close to the annual contribution limit.

  • Estimated Tax Surprise: As an employee, two is likely to leave you under withheld and if  your extra job is a contract position, you’ll receive a Form 1099 summarizing how much you billed a particular client in all of 2023. If this is the first time receiving a 1099, you may be surprised to learn that you’re responsible for making all tax payments to the IRS. If you are making a net profit, tax payments for 2023 will need to be made in September and January 2024.

What you can do: Estimated tax payments can sometimes be rather large, especially if you’re making a decent amount of money, so keep good bookkeeping records so you can budget for these payments.

Please call if you have questions about these or any other job-related tax topics.

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