Many of us younger workers who have entered the workforce in the last decade have seen it – Work more jobs! The idea is simple enough: more work hours translate to more money. More importantly, “diversifying” our employers provides a bit of financial security to those of us impacted by the Great Recession. As I later found out, however, there are some downsides to those multiple W-2’s that few people consider.
1. Insufficient income tax withholding
Although I had a masters and a full-time job with the state government, my job wasn’t providing me with any advancement opportunities and government budget cuts meant no raises during my tenure there. Like so many, I chose to remedy this situation by finding ways to supplement my income.
In my particular case, I started teaching online courses part time for various colleges. This was a great way to let me raise my family’s quality of life and bulk up my savings while still allowing me to be home with my family.
Most of us simply check the “single” rate box on our W-2s and assume that we’ll pay more than enough into the system to cover any federal or state income taxes. Working for multiple employers, however, means that each employer is unaware of your earnings from the other employers.
Your total income might put you into a tax bracket other than the one your individual employers are using for your tax withholdings and you may end up owing Uncle Sam in April.
2. Over payment to Social Security
Along the same lines of the income tax issue is overpayment into social security. Once again, each employer is unaware of your earnings for the others. Earnings over certain amounts are not subject to social security withholdings (the limits are $117,000 for 2014 and $118,500 for 2015).
If it takes multiple jobs for you to exceed these limits, the odds are that you’ll have overpaid into social security. This isn’t a permanent issue, though, as the IRS will reimburse you for this overpayment when you file your federal income taxes.
3. Reduction in short term disability benefits
When I was pregnant with my second child, I realized some of the even lesser known implications of having multiple employers. Instead of maternity leave, state employees could utilize the state’s short term disability insurance in order to receive pay for up to six weeks of leave after having a baby.
With only a few weeks until my due date, I called our main human resources officer and started the paperwork for what I anticipated to be my six week absence. As I reviewed the forms, I noticed a check box for anyone who had additional outside employment and a box to input those wages.
That’s right, if you have any outside income, that amount is typically subtracted from any short term disability benefit from your full time employer. In my case, I did the only thing that let me keep both incomes intact. I decided to forgo the disability insurance entirely and only took a few days leave to deliver my daughter.
To me, the disability insurance was for the wages of my full-time job, outside income should have been irrelevant.
4. Reduction in unemployment benefits
The same is true for unemployment benefits in my state. If I were to lose my full time job, I would be left with next to no unemployment benefit after my outside wages are deducted. Once again, my employer is paying towards a benefit that I will never be able to use.
My guess is that these last two stipulations were put into place in an attempt to avoid fraudulent claims. They were also probably put into action back when “moonlighting” was frowned upon. It’s not been until recently that underemployment has become so prevalent, necessitating multiple jobs for so many of us.
Don’t get me wrong, I love my multiple jobs and I’m proud of those extra W-2’s that come to my mailbox. It’s just important to know what the possible implications are.
Amanda is a geologist, college instructor, amateur homesteader and proud financially independent woman. Amanda has had a wide variety of financial experiences and considers herself proof that with a little patience and some discipline, a good plan can overcome any financial obstacle.