How to handle local city taxes when working in a different city - need withholding advice

Thanks for the response! For the quarterly payments, are there specific due dates I need to follow? And would I get in trouble if I miss one of the quarterly payments but pay the full amount by tax time?

Most cities follow the same quarterly tax schedule as the IRS: April 15, June 15, September 15, and January 15 of the following year. But you should check with your specific city as some have their own deadlines. You typically won't face major penalties if you miss a quarterly payment but pay in full by the filing deadline. However, some cities do charge interest or small penalties for late quarterly payments. The penalties are usually much less severe than what the IRS charges for federal estimated tax underpayments.

How does taxr.ai handle it if your income changes during the year? I sometimes get bonuses that would affect the 1.5% calculation.

I'm skeptical about using third-party services for tax payments. Couldn't you just set calendar reminders yourself and avoid paying for a service? Does it actually submit the payments for you or just remind you?

For changing income situations like bonuses, you can update your expected annual income in the dashboard anytime, and it automatically recalculates your remaining payments for the year. That way, you're always paying the right amount based on your current projections. I actually tried the calendar reminder approach for two years and still managed to miss payments. The service doesn't just remind you - it can handle the actual payment submissions if you set it up that way, or just calculate the amounts and remind you if you prefer to make the payments yourself. For me, the automation was worth it since I kept forgetting.

Wait, so this service just gets you through phone queues faster? How does that even work? Sounds like something that would just take my money and leave me on hold anyway.

Does this work for all city tax departments or just certain ones? My city's tax office is notoriously difficult to reach, especially during tax season.

It uses some kind of call technology to navigate phone trees and wait on hold for you. When they reach a real person, you get a call back immediately. I was skeptical too, but it definitely worked - no more waiting on hold for hours while trying to work. It works with pretty much any phone system, not just specific city departments. It's basically handling the waiting game for you. My city's tax office is also a nightmare during tax season - I tried for three days straight before using this and got nowhere.

Wouldn't this essentially be giving the federal government an interest-free loan though? Seems better to just make the quarterly payments to the city instead.

You're absolutely right that it's not the most financially optimal solution - you are essentially giving the federal government an interest-free loan. The advantage is purely convenience. Some people prefer the simplicity of having it automatically deducted rather than remembering to make separate quarterly payments. It's a psychological thing - easier to never see the money than to have to actively pay it out later. But yes, direct quarterly payments to the city would be more financially efficient.

Thanks for bringing this up! I've actually checked into this with my city's tax office. Unfortunately, since I don't pay any local tax to the city where I work (they don't have a local income tax for non-residents), there's no credit available. If I were paying taxes to both cities, a credit would definitely help, but in my case I'm only liable to my residence city.

This is super important advice! I was double-paying city taxes for YEARS before I realized my home city offered a 100% credit for taxes paid to the work city. Could have saved thousands if I'd known earlier.

This is such a helpful summary! I was getting a bit lost in all the different options too, so having them broken down into those key decision points really clarifies things. I'm leaning toward the same approach you mentioned - starting simple with the separate savings account and monthly transfers, then building from there if needed. It seems like the lowest-risk way to get started without committing to any paid services upfront. One thing that's making me feel more confident about tackling this is seeing how many people in this thread have successfully solved the same problem. Before reading all these responses, I thought I was stuck with just accepting that annual surprise tax bill, but clearly there are plenty of workable solutions. Has anyone who tried the manual approach (savings account + transfers) ever had issues with discipline or forgetting to make the transfers? I'm wondering if I should set up automatic transfers right from the start or try to build the habit manually first.

From my experience, I'd definitely recommend setting up automatic transfers right from the start rather than trying to build the habit manually. I tried the manual approach for about 6 months and missed transfers at least 3 times - usually when life got busy or I had unexpected expenses that month. Once I automated it, the problem completely went away. Most banks let you set up recurring transfers for free, and you can always adjust the amount if your income changes. The key is treating it like any other automatic bill payment - you just factor it into your budget and forget about it. One small tip: I set my automatic transfer for the 2nd of each month instead of the 1st. That way if there are any delays with my paycheck deposit, the tax money transfer doesn't accidentally overdraw my account. Learned that lesson the hard way! @NebulaNomad Your approach sounds solid - starting simple and building up is definitely the way to go.

I'd definitely recommend setting up automatic transfers from the start! I tried the manual approach initially and found myself forgetting about 30% of the time, especially during busy months. The automatic transfer removes that mental burden completely. What worked really well for me was setting the automatic transfer for the day after I get paid. That way the money moves before I even see it in my checking account balance, so it doesn't feel like I'm "losing" money I was counting on. Plus, if you set it up through your bank's online banking, you can always pause or adjust it if your income changes. The peace of mind knowing that your city tax obligation is being handled automatically is worth way more than any minor interest you might earn by manually managing it. Just make sure to review your total saved amount a couple times a year to ensure you're on track!

I'd definitely recommend setting up automatic transfers right from the start! I tried the "build the habit manually" approach for about 6 months and inevitably forgot transfers during busy periods at work or when life got hectic. The beauty of automation is that it removes the discipline component entirely - the money just moves without you having to think about it. Most banks let you set up automatic transfers with just a few clicks, and you can always adjust the amount or pause it if your income situation changes. One thing I learned is to schedule the transfer for a few days after your paycheck hits, so you know the money is there. I do mine on the 3rd of each month since I get paid on the 1st. That way there's no risk of overdrafts or timing issues. The peace of mind is worth it - knowing that money is automatically building up for tax time means one less thing to stress about during an already stressful season!

I'd definitely recommend setting up the automatic transfers right from the start! I tried the manual approach first thinking I'd build good habits, but life gets busy and it's so easy to forget or tell yourself "I'll do it next week." After missing two months of transfers and then scrambling to catch up, I learned my lesson and automated everything. Most banks let you set up recurring transfers for free, and you can always adjust the amount if your income changes. The key is making it as frictionless as possible so you don't have to rely on willpower or memory. One trick that helped me was setting the transfer date for right after I get paid, so the money moves before I even really "see" it in my checking account. Makes it feel less like I'm losing money and more like it was never there to begin with.

I'd definitely recommend setting up the automatic transfers right from the start! I tried building the habit manually first and honestly failed at it within two months. Life gets busy and it's so easy to forget or tell yourself "I'll do it next week" when other expenses come up. With automatic transfers, you literally can't forget - the money just moves without you having to think about it. Most banks let you set these up in about 5 minutes through their online banking. I set mine for the day after my paychecks hit, so the money disappears before I even get used to seeing it in my checking account. The psychological benefit is huge too. When tax time rolls around, that money has been "gone" all year so it doesn't feel like you're taking a big chunk out of your current finances to pay the bill. It's already sitting there waiting. If you're worried about cash flow, start with a slightly lower amount for the first few months to make sure it works with your budget, then increase it once you're comfortable with the routine.

I'd definitely recommend setting up automatic transfers right from the start! I tried building the habit manually for about two months and kept forgetting or finding excuses to skip transfers when money was tight. Once I automated it, the problem completely disappeared. The key is treating it like any other recurring bill - rent, utilities, etc. Most banks let you set up automatic transfers for free, and you can usually schedule them for right after your paycheck deposits so the money moves before you even think about spending it elsewhere. I started with a slightly lower amount than I calculated I'd need, just to make sure the automatic transfer wouldn't cause any overdraft issues while I was getting used to the new budget rhythm. After a couple months of seeing how it worked, I increased it to the full calculated amount plus a small buffer. The peace of mind is honestly worth it - no more mental load of remembering to transfer money or feeling guilty when I forget. It just happens in the background like any other automated bill payment.