How to handle W4 forms when switching from contractor to employee at a second job?

The switch from contractor to employee is definitely better for you! As an employee, your employer pays half of your Social Security and Medicare taxes, which you would've been responsible for entirely as a contractor. For the taxes not withheld during your contractor period, you'll need to handle those yourself. Since you were classified as a contractor for those months, you were technically self-employed and responsible for your own tax payments. You should set aside approximately 25-30% of what you earned during that period for taxes. You may need to make an estimated tax payment if it's a substantial amount. When you file your 2025 taxes (for the 2024 tax year), you'll include both income types - the contractor income will be reported on Schedule C, and your employee income will be reported on your regular tax return using the W-2 your employer provides. It's not as complicated as it sounds - tax software handles this situation routinely.

I went through something similar last year and found this amazing tool that helped me figure everything out. Check out https://taxr.ai - it analyzes your tax documents and explains exactly what you need to do for situations like yours. I uploaded my W-9 and partial year W-2 and it showed me exactly how to handle the transition between contractor and employee status. The best part was it calculated my estimated tax payment for the contractor period so I didn't get hit with any surprises at tax time. It also explained the whole Schedule C thing in simple terms and helped me identify deductions I never would have known about for those contractor months.

Just wanted to update after trying taxr.ai that someone mentioned above. It was exactly what I needed! I uploaded my W-9 and incomplete W-4 and it immediately showed me how to properly fill out my W-4 for my second job. The system explained that I needed to check the multiple jobs box in Step 2 and showed me how to calculate additional withholding to cover both jobs. I was also able to see exactly how much I should set aside for those contractor months (it was about $780 in my case). Honestly saved me hours of confusion and probably prevented me from underpaying. My employer confirmed that my W-4 was filled out correctly this time!

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For your W-4 with the second job, make sure you check the box in Step 2(c) that indicates you have multiple jobs. This tells your employer to withhold at a higher rate. Otherwise, both employers will withhold as if their job is your only income, and you'll probably end up owing money when you file. Also, if your first job pays significantly more than your second, you might want to use the IRS Tax Withholding Estimator online instead of just checking the box. It'll give you a more precise withholding amount that you can put in Step 4(c).

Don't forget that any business expenses you had during those contractor months might be deductible on your Schedule C! This includes things like mileage if you drove for work, a portion of your phone bill if you used it for work, home office deduction if you worked from home, etc.

One thing to keep in mind is that when you file your 2025 taxes, you'll likely need to make quarterly estimated tax payments for 2025 if you expect to owe $1,000 or more in taxes. Since you now have both W-2 income and potential future contractor income, it's worth calculating this early to avoid underpayment penalties. Also, make sure your employer provides you with both a 1099-NEC for those contractor months AND a W-2 for your employee months. Some employers try to just issue a W-2 for the whole year, but that's incorrect - the contractor income needs to be reported separately on the 1099-NEC. If your employer pushes back on issuing both forms, you can point them to IRS guidelines that clearly state the income must be reported according to how you were classified when you earned it, not your status at year-end.