Off to Two Mines: Tax Advice for Those Working Two Jobs

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Illustraton by Jack Vaughn
Some people working two jobs earn their primary income in a different city and a secondary income in their home town.

When you’re working two jobs and receive two W-2’s, tax form preparation isn’t substantially different from the (ahem) simple case of one employer and one W-2. But there are some considerations that may lessen the tax you pay.

First of all, if you worked for two employers who paid you a total of more than $37,800 in 1984, there’s a good chance that excess social security (FICA) was withheld from your pay. Check to see that no more than a total of $2,532.60 was withheld; just add up the amounts on the line marked FICA on your W-2’s. The excess may be taken as a credit on line 61, Form 1040.

Commuting to your second job (or second job location with the same employer) from the first job is a deductible expense on Form 2106 for itemizers and nonitemizers alike. This deduction has been complicated somewhat, however, by specific IRS rulings. For example, the service judges that the principal place of business for a doctor is both his or her office and the hospital. Hence travel between isn’t deductible. In addition, traveling from a union hall to a job site isn’t deductible.

If you have two jobs in different cities or general areas, the question becomes, What is your principal place of business? The entire city or general area of your principal place of business is called your tax home (as opposed to your residence) by the IRS, and the location of this base can have profound effects on your taxes. For example, if you work in two places that are so far apart that you have to spend some nights sleeping at each location, you may be able to deduct living expenses at the location that is not your tax home. The location of your tax home is determined by comparing (a) the amount of time spent working in each area, to (b) the degree of your business activity in each area, to (c) the amount of income you earn in each area.

This could lead to a situation where your residence is not your tax home. If, for example, your main employment is in a distant city, that’s your tax home even though you travel to your residence each weekend to be with your family. In this case, the IRS would consider your residence to be maintained for personal convenience. But (to stretch this hypothetical situation one step further) let’s say you happen to have minor employment in the area of your residence. Now you can deduct both your travel expenses from your tax home to your residence area and also your living expenses while there—including your part of the costs of maintaining the household. Thus a portion of your home and expenses while there become deductible. On the other hand, you may not deduct any living expenses for being in the area of your tax home.

Another peculiar situation for a tax home occurs when a worker is on the road constantly. The IRS agent may consider that such a person has no tax home and therefore can’t deduct expenses for business travel away from home. There are three main criteria for establishing a tax home in this case: (a) Some work is done in the vicinity of the person’s residence. (b) Rent is paid on the residence even when the person is on the road. (c) The residence is in an area where the person was raised or has lived for some time, or a family member lives in the area.

If you and your spouse work in different locations, bear in mind that you may have different tax homes, even if you file a joint return.

What if you’re assigned a temporary position by your employer at a distant location? In order to maintain that your original tax home continues as your tax home, therefore making your travel and living expenses while on assignment deductible, you’ll have to prove that the assignment was for a known limited length of time (less than one year in one recent tax case), and that you’ve maintained your original residence. Having a family at the original residence (and tax home) is an important criterion.

If your long-term goal is to buy property in the country, you’ll save enough for it sooner not only by holding two jobs but also by paying close attention to tax rules.