Submitted By: Patricia
Answered: April 22, 2016 11:55 am

I have a job and also do some work as an independent contractor. Can I increase my 401(k) contribution at my job to avoid paying estimated taxes on my contract work?

There are various strategies that can be used by someone with a job to avoid paying estimated taxes with respect to income not subject to withholding. Some strategies include:

  • Increasing withholding on your wages
  • Reducing your income with options available through your job (e.g., making pre-tax contributions to 401(k)s, FSAs, etc.)
  • Reducing taxable income. Use any and all tax-saving moves to reduce your income. This will, in turn, reduce your tax bill and the need to pay estimated taxes on your contract work.

However, be sure that the strategies you use address not only the income tax on your contract work but also any self-employment tax that may be owed.

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Tax Glossary

Carryback

A tax technique for receiving a refund of back taxes by applying a deduction or credit from a current tax year to a prior tax year. For example, a business net operating loss may be carried back for two years.

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