Nancy, a regular About Taxes reader, emailed me to ask:
"I searched the IRS website on info about extra withholdings but can't seem to find an answer. I just took a second job where I'm being paid as a 1099 vendor. Can I have extra federal and state tax withheld from my payroll with my primary employer to be paid in safe for 2008? Or do I need to file and pay quarterly with the IRS? There isn't an option on our payroll to have extra social security withheld so I wasn't sure if it's okay to wait until I file my 08 return to pay that."Individuals can always adjust their income tax withholding to cover the additional taxes for a freelance job or other income they have. Simply fill out a new Form W-4 and give it to your employer.
There's a couple different ways to adjust the withholding figures. One is to adjust the number of withholding allowances. The other is to indicate an additional dollar amount to withhold each paycheck. To use either method you will first need an idea of how much extra taxes you'll be responsible for.
As a freelancer, you'll also be paying the self employment tax (for Social Security and Medicare). You extra income tax withholding will help cover this tax as well. You cannot adjust your Medicare and Social Security withholding on your paycheck, as these withholding rates are set by law.
The other way to do this is to make estimated payments, which is actually the method that I prefer. That's because you will be able to run calculations based on actual income and expenses, and then pay in just the right amount of tax. This does require some extra planning and number crunching, but the benefit is you'll be able to pay a more targeted amount.
