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 or more jobs can save you an incredibly unpleasant surprise come tax time!
Two Employers
If you’re a salaried employee for all of your jobs (meaning you receive a T4 – Statement of Remuneration for each one), you could be in for an unexpectedly large tax bill next spring. Even though both employers are deducting tax from your weekly paycheque, 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. Each year there is a new “basic personal amount” which means that the earnings you make, up to the amount, are 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. There are basic personal amounts for both the federal tax portion and the provincial tax portion.
The easiest way to prevent a big tax bill is to give your second employer a completed Form TD1 Personal Tax Credits Return for both federal and provincial taxes. These forms are 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” on the back of each form; 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.
Two Businesses
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 logbook for each business when tracking mileage
- Set up separate bank accounts for each business
What Edition of TurboTax Is Right for Me?
Answer a few simple questions on our product recommender and we can help guide you to the right edition that will reflect your individual circumstances.
You can always start your return in TurboTax Free, and if you feel the need for additional assistance, you can upgrade to any of our paid editions or get live help from an expert with our Assist & Review or Full Service*. But don’t worry, while using the online version of the software when you choose to upgrade, your information is instantly carried over so you can pick up right where you left off.
*TurboTax Live™ Full Service is not available in Quebec.