Retirement/tax advice

To keep a very long story somewhat not that long, 27 years old, 2 full time jobs, 1 part time consulting job for underground construction (1099). Main job employed by local government, usual retirement plan with deferred compensation plan also. Started second full time job 7 months ago, don’t plan on being here more than 5 years so no retirement plan made (only working here to fund a new business venture in the near future). Claim 0 at both full time jobs, pay taxes every quarter for personal part time job, grossed $114k this year. This year I ended up owing $14,000 in taxes to Uncle Sam. My “financial guy” said to put more into my deferred compensation portfolio to drop my gross at my first job, thus hopefully eliminating me owing taxes next year. Only problem is, the taxes I owe is only based off of half the gross from the second job since I only started 7 months ago, they still have yet to see the rest of the gross salary. Wouldn’t this mean if I didn’t change any numbers to my deferred comp, my taxes owed would be a lot more next year? I guess what I’m asking is, has anyone here had to increase pre-tax investments into a portfolio to drop their overall gross so they lessen the tax burden come tax season? This is my first time doing this and I’m trying to find people who have actually had to do this, instead of listening to a friend who said he knows of guys who had to do it.

 

Hey bro, I do taxes for a living. No one's gonna be able to help from that post. Every situation is different. Just make sure you check the box that you have 2 jobs on your w-4, talk to your HR or payroll person and they can help. Putting more in your retirement will lower your AGI and therefore your taxes but you will still need to increase your withholding from the sounds of it. I recommend looking for a local CPA firm to help. Putting pre tax money into retirement helps now but you will have to pay tax on it later when you take it out.

 

Agree with crackers.

No matter what MAX out your pre-tax retirement limits. This is NOT tax advice. This is just smart. Plus yes it will lower your taxable income.

But - my two cents..............the 1099, moonlighting..........are you treating that as a business? You will find more deductions there.

 

As the others said, each job is withholding as if it were your only job. Taxes are paid on how much you make total, not how much you make at each job. The progressive tax system means you pay more per dollar earned as your income increases.

So lets say in this particular land, the tax rate is 20% for income up to $60,000 earned, then 40% for the income from $60,001 to $120,000. You work two jobs. You are paid $60,000 from each. Unless they know about the other job, each of your employers is going to withhold only 20% ($12,000 each), when in reality, you are going to need to have more withheld ($18,000 by each job). Your tax bill is $36,000, but only $24,000 was withheld, so you owe.

Talk to your HR / payroll department(s).

 

I suggest maxing out pretax 401k up to the employer match.

Next max out HSA. And invest it. Pay cash for medical, and keep receipts. You can reimburse yourself anytime, even years from now.

Then max out Roth IRA. Even if you have a Roth 401k because you have more investment options in the IRA.

Now loop back to the 401k and finish pretax max.

If you still have money left to invest, see if you can do Roth conversions from post tax 401k to Roth IRA.

After that, brokerage account.