Working two jobs? Beware of the potential tax bite
Two jobs may help boost your income during the year, but if you haven’t completed your paperwork correctly you could end up owing when you file your tax return.
Maybe you work full-time but you have decided to take on a few extra weekend hours at a part-time job, so you can save for a special purchase. Or perhaps you are a student and decided to take two part-time jobs because you can’t work full-time hours. It seems like a great idea until tax time comes.
Every Canadian taxpayer is allowed a personal exemption. For 2012, you can earn $10,822 before you begin paying federal income tax. And when your employer asks you to complete a TD1 Form so they can calculate how much tax to withhold, you claim this personal exemption amount.
But if you have two employers and they do not know about your other job, they both calculate your tax withholdings using this personal exemption amount. However, you are only entitled to claim this credit once. Unless you have told your employer you have another job, chances are you will owe taxes when you file.
You can avoid this by telling one or both of your employers about your other job. You can request that only one of them includes the basic personal amount in their calculation. You don’t have to tell your employer but it is recommended to make sure the right amount of tax is withheld. You need to ensure that you are not claiming the personal amount more than once so complete your TD1 Form correctly.
But whatever you decide, do have some sort of plan. It is disheartening to work two jobs only to face an unexpected expense at the end.
Master tax pro and franchise owner