If you’ve got more than one job, you’re probably so busy just trying to keep up. Paying taxes is likely the last thought to cross your mind. But, knowing the ins and outs of paying your taxes when you have 2 of more jobs can save you an incredibly unpleasant surprise come tax time!
If you’re a salaried employee for both of your jobs (meaning you receive a T4 for each), you could be in for an unexpectedly large tax bill next spring. Even though both employers are deducting tax from your weekly cheque, the formula used to calculate these amounts could leave you short at tax time.
All taxpayers are allotted a minimum credit on their tax returns. This credit, called the “basic personal amount” is around $11,000. Basically that means that the first $11,000 you earn is tax-free. Unless you inform your payroll department that you have a second job, both employers will factor in the basic personal amount when deducting tax from your pay. Essentially, the same credit is being used twice. Since you can only apply the basic personal credit once on your tax return, you may end up with tax owing.
The easiest way to prevent a big tax bill is to give your second employer a completed Form TD1 Personal Tax Credits Return. This form is used by the payroll department to figure out the right amount of tax to deduct from your pay. Check the option for “more than one employer at the same time”. This gives the payroll team the heads-up that your deductions need to be adjusted.
Don’t forget that each province also has its own Form TD1. Make sure to fill out both forms.
One Employer and Self-Employment
If you’ve picked up a freelance gig along with your 9-5 job or started your own small business in your spare time, it’s a good idea to set aside a portion of your self-employment earnings for tax time. It’s easy to forget that the money you’re making with your side business hasn’t been taxed yet. But it will be – on your tax return. To cover your future tax bill, bank a portion of each sale you make. You might make a few dollars in interest too.
If you’re not the best at saving money, no worries. Remember that Form TD1? There’s a spot to request that extra tax be deducted from your “regular” job. Even an extra $10/week would mean you’re banking $520/year toward your tax bill. The one downside is that you won’t be earning any interest.
If you’re your own boss full-time and run more than one business, planning for taxes is especially important. You are the payroll department! Along with making sure you’re setting aside money for tax time, your tax return can be a bit more complex. Because each business is reported separately on your return, be sure to keep accurate records for each one.
- Keep your expenses separately. When buying office supplies such as printer paper, buy two and request a separate receipt for each
- Keep a separate log book for each business when tracking mileage
- Set up separate bank accounts for each business