Thirty-six percent of U.S. adults have a side hustle, and if you’re one of them, you might use the extra money made to cover essential bills, save for retirement or take a vacation.
There are a number of different side hustles and reasons for starting them, but there’s one thing that every side hustler — no matter how much or little they earn — must face during this time of year: taxes.
Unfortunately, many people who make additional income with side hustles don’t have the knowledge or tools to navigate tax season successfully.
In fact, although 92% of Americans think side hustles are becoming the new normal, 56% of those who currently work one feel completely lost when it comes to reporting that income on their taxes, according to a new survey from tax preparation software company TaxAct.
What’s more, a lot of U.S. side hustlers struggle just to understand the tax implications related to their gigs.
Only 44.1% of people with side hustles said that they’re aware of their gig’s tax implications and “know the ins and outs” to file, and 32.3% said that they’re aware of the tax implications but will need help to file, per the report.
Another 14.2% of side hustlers are aware of the tax implications but don’t believe they apply to them — and 8.8% were unaware of any tax implications at all, the survey found.
However, side hustlers with steady incomes who think they’re exempt from paying taxes are likely incorrect — and it’s a mistake that could be very costly. You must file a return if you have net earnings of $400 or more from gig work, per the IRS.
“Even if you find yourself in a situation where you didn’t set aside any money [for taxes], and now you’re going to owe, still file as quickly as possible because then you know exactly what that tax liability is,” Karen Orosco, president of global consumer tax and service delivery at H&R Block, told Entrepreneur. “There are payment options with the IRS. So the sooner you file, the more time you have to figure out how you’re going to make that payment.”
