The way we work is changing, with more and more individuals building careers and earning income through the gig economy and side hustles. But with this flexibility comes a new set of tax responsibilities that can feel overwhelming. At Lightening the Load, we specialize in guiding individuals through complex tax situations, and that includes helping you turn your side hustle into a financially savvy operation.
Your tax journey as a gig worker is fundamentally different from that of a traditional employee. Here’s what you need to know.
The Importance of Tax-Conscious Record Keeping
Unlike a W-2 employee, taxes aren’t automatically withheld from your gig income. This means you are responsible for keeping detailed records of both your income and your expenses throughout the year.
- Track Your Income: Keep a log of all income, even if it’s not reported on a Form 1099. Every dollar earned from a side hustle is considered taxable income.
- Deduct Your Expenses: The biggest opportunity for tax savings lies in properly deducting your business expenses. This includes costs for things like:
- Business mileage for a rideshare driver
- Supplies for a freelance artist
- Internet and phone bills used for work
- Software subscriptions and professional fees
Estimated Quarterly Taxes
Since taxes aren’t taken out of your paychecks, you are likely responsible for paying estimated quarterly taxes. Failing to do so can result in penalties from the IRS. We can help you calculate and schedule these payments so you can stay ahead of your tax obligations and avoid a large tax bill at the end of the year.
The Self-Employment Tax
Another key difference is the self-employment tax. This includes both the Social Security and Medicare taxes that would typically be split between an employee and employer. As a self-employed individual, you are responsible for paying both portions, which adds an additional layer to your tax planning.
Your side hustle deserves a smart tax strategy. Let us at LTL help you turn your gig into a financially savvy operation.
