Hey ,
Having assisted numerous individuals who run side hustles while employed, I can confidently say that one of the most common challenges they face is dealing with the tax implications.
It is essential to report all income from both sources to the IRS, even if you don’t receive a 1099 form from clients. This requires meticulous record-keeping of every
payment received and expenses incurred.
Failure to report any income or claim any deductions could lead to penalties and audits from the IRS.
Another critical aspect to consider is the need to pay self-employment taxes on side hustle income, in addition to income taxes and payroll taxes withheld from the paycheck.
Self-employment taxes comprise Social Security and Medicare taxes and amount to 15.3% of net earnings from self-employment. This can significantly reduce the profit margin and make saving money or investing in the business harder.
Lastly, making estimated quarterly tax payments on side hustle income throughout the year is necessary instead of waiting until April 15th to pay taxes.
This requires estimating how much will be earned and owed in quarterly taxes and sending a payment to the IRS by the due dates. Underestimating or missing a payment could result in interest and penalties.
Running a side hustle requires careful planning, budgeting, and attention to detail. With my assistance as a professional tax expert, you can ease the burden and help navigate the complexities of tax compliance.
Call my office now at 202-618-1297 to become my tax client, or click the link below.
