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Failing to manage taxes properly for your side hustle could lead to penalties or missed savings. The good news? With a bit of effort and organization, tax season can be less daunting than it seems.
Knowing things like what records to keep, when to file forms like 1099s, and how to use tools like online calculators can make all the difference. These simple steps will help you stay on track without feeling overwhelmed.
Organization is your greatest tool for tax success.
Keep records of every dollar earned from your side hustle, no matter how small. Use a simple spreadsheet or accounting software to log transactions as they happen.
Record all business-related expenses too. These can include supplies, internet fees, or even portions of home utilities if you work from home.
Always save receipts and invoices. These support your claims if you're ever audited by the IRS.
Review your records monthly to catch errors early and ensure nothing gets missed.
Staying on top prevents scrambling later in the year when deadlines approach.
Deductions reduce your taxable income, lowering how much you owe. As a side hustler, take advantage of the many deductions available.
Identify costs directly tied to your business. This includes equipment, subscriptions for tools or apps you use professionally, and travel expenses for client meetings.
If you work from home, consider claiming the home office deduction. It covers a percentage of rent or mortgage costs based on workspace size.
And keep mileage records if driving is part of your hustle. Even small trips add up over time.
Research industry-specific deductions that apply to your line of work. A little effort here can save big money during tax season.
Online tax calculators make estimating taxes fast and simple. These tools save time, minimize errors, and help you avoid surprises when filing.
You can use an online tax calculator for both end-of-year and quarterly taxes.
For example, you can easily obtain a quarterly tax estimate by using Keeper’s advanced calculator. Simply upload your tax forms and Keeper will prepare your return for you - with 100% accuracy guaranteed. Also, a tax pro will review and sign your return.
Filing forms correctly is critical when reporting side hustle income. Many platforms, like freelance marketplaces or gig apps, issue a Form 1099-NEC if you've earned $600 or more in a year. However, you're responsible for reporting all income - even amounts under this threshold.
If you hire contractors to assist with your side hustle and pay them over $600 annually, you must provide them with a Form 1099-NEC too.
Use tools like the IRS’s Filing Information Returns Electronically (FIRE) system for submissions.
Make sure to check deadlines: most 1099s are due by January 31st.
Accurate filing avoids penalties while keeping your tax situation clean and organized throughout the year.
Side hustlers often face unique tax challenges. If your situation feels overwhelming, a tax professional can help untangle the details.
For example, navigating multi-state income taxes or claiming industry-specific deductions might require specialized knowledge. A CPA or enrolled agent ensures you're compliant while maximizing potential savings.
Professionals also assist with self-employment taxes, quarterly payments, and strategies to reduce what you owe legally. They’ll review your records to ensure accuracy and address any red flags that could trigger an audit.
While hiring a pro comes at a cost, their expertise often saves more money than it costs. Plus, they provide peace of mind during what can otherwise be a complex process!
