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I'm going to make quite a bit of "side gig" income this year. How can I prepare?

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I'm going to make quite a bit of "side gig" income this year. How can I prepare?

I'm going to make quite a bit of "side gig" income this year. How can I prepare?

When you get paid with a 1099NEC or no form you are a self employed independent contractor.  You will file a Schedule C in your personal 1040 return.


Some general info on self employment on Schedule C.......

You will need to keep good records.  You may get a 1099NEC at the end of the year if someone pays you more than $600 but you need to report all your income no matter how small.  You might want to use Quicken or QuickBooks to keep track of your income and expenses.


There is also QuickBooks Self Employment bundle you can check out which includes one Turbo Tax Online Self Employed  return....



When you are self employed you are in business for yourself and the person or company that pays you is your customer or client.


To report your self employment income you will fill out schedule C in your personal 1040 tax return and pay SE self employment Tax.  You will need to use the Online Self Employed version or any Desktop program but the Desktop Home & Business version will have the most help.


Here is some IRS reading material……


IRS information on Self Employment



Pulication 334, Tax Guide for Small Business



Publication 535 Business Expenses



What Self Employed expenses can I deduct?



Tax Tips for Uber, Lyft, Sidecar and other Car Sharing Drivers FAQ



You pay Self Employment tax on $400 or more of net profit from self-employment in addition to any regular income tax.  You pay 15.3% SE tax on 92.35% of your Net Profit greater than $400.  The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare.  So you get social security credit for it when you retire.  



You may need to send in quarterly estimated payments to cover any self employment tax and increase in income.


You must make quarterly estimated tax payments for the current tax year if both of the following apply:

- 1. You expect to owe at least $1,000 in tax for the current tax year, after subtracting your withholding and credits.


- 2. You expect your withholding and credits to be less than the smaller of:

    90% of the tax to be shown on your current year’s tax return, or

  100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months).


Turbo Tax will calculate the 1040ES estimated payments



How to make the Estimated payments



Here are the blank Estimates and instructions…..



To prepare estimates for next year you start with your current return, but be careful not to change anything.  For Online returns, if you can't get back into your return, Click on Add a State to let you back into your retun.


You can just type W4 in the search box at the top of your return , click on Find. Then Click on Jump To and it will take you to the estimated tax payments section. Say no to changing your W-4 and the next screen will start the estimated taxes section.


Or Go to….

Federal Taxes or Personal (Desktop H&B)

Other Tax Situations

Other Tax Forms

Form W-4 and Estimated Taxes - Click the Start or Update button


To just estimate the remaining quarters put in that you paid $1 for the missed quarters so it will only calculate the remaining quarters.


The 1040ES quarterly estimates are due April 18, June 15, Sept 15 and Jan 16, 2024.  Your state will also have their own estimate forms.


Or you can pay directly on the IRS website https://www.irs.gov/payments

Be sure to pick the right kind of payment and year.....2023 Estimate


I'm going to make quite a bit of "side gig" income this year. How can I prepare?

The most important thing to do right now, other than educating yourself, is to keep accurate and reliable records of your income and expenses.  "Reliable" means that you have enough detail to verify the business purpose of the expense, and that you maintain the records contemporaneously with the expense -- you make the record close enough in time to incurring the expense that your memory is considered reliable.  (It would generally not be considered reliable to reconstruct your expenses only when preparing your tax return.)


This includes not just receipts, but some kind of spreadsheet, accounting program, diary or account book that lists the date, amount, and purpose of the expense.  If you use a personal vehicle in business, you need a log book, diary, or app to keep track of the date, mileage, and business purpose of each trip.  


You may want to buy a small business tax guide.  "Lasser's" is a brand name I know of, although there are other similar guide books. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
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