Reporting income from your side gig can be tedious, but what happens when you have multiple side gigs? TaxGlobal is here to help. Here’s your handy, gig-economy guide to tax reporting.
New income reporting requirements for gig workers
If you got any payment over $600 from one of your gigs, you should have received a Form 1099-NEC (a copy will also have been sent to the IRS). If, on the other hand, you received more than $5,000 in sales via a credit card, debit card, or prepaid card through a third-party processor, you should receive a Form 1099-K.
If this seems new to you, that’s because it is. Due to processing delays, these new reporting requirements will take effect for the 2024 tax year, even though they were introduced earlier. These new requirements will likely have the biggest impact on self-employed taxpayers like gig workers, online sellers, freelancers, and independent contractors.
Even if you don’t receive any of these forms, though, you’re still required to report your self-employment earnings to the IRS, via your tax return, if your net income (or your business income minus any business expenses) meets or exceeds $400. This is true even if you were paid in cash rather than online or through a third-party platform.
How to report income from side gigs
If your self-employment income can be classified as nonemployee compensation (which it almost always can), you’ll report that income, along with your business expenses, on Form Schedule C. This goes along with your Form 1040 and records your business’ profit and/or loss.
How to report income from more than one side gig
If you have multiple gig jobs, you may be able to simply record them all on the same Schedule C form. For example, if you do graphic design for multiple clients, or if you sell art on Etsy but also at an in-person gallery, you can group those similar jobs together and report the income in one place.
But if you have multiple side gigs that are significantly different, such as a catering company and a dog walking business, you may need to attach multiple Schedule C forms to your tax return.
How to reduce self-employment taxes
If you’re a self-employed taxpayer, deductible business expenses are your new best friend. Track all the expenses your business incurs during the tax year, and then use them to lower your taxable income on your return.
Expenses you can deduct include things like:
Home office costs
Supplies
Professional and legal fees
Utilities
Insurance
Travel and vehicle expenses
Taxes
Licenses
Subscriptions
Membership dues
Software
Of course, to be deductible, these expenses must be directly linked to your business, and must be considered necessary and reasonable—in other words, not extravagant or unnecessary to the running of your business.
Don’t forget Social Security and Medicare
If you live in the U.S. and make money, you have to contribute toward Social Security and Medicare. If you have an employer, they’ll usually withhold 7.65% of your paycheck, match it, and send the 15.3% to the IRS to cover Social Security and Medicare taxes.
Obviously, when you’re self-employed, you don’t have employer withholdings. As a result, if your net income is at least $400, you’re required to file taxes and pay the whole 15.3% yourself. These are known as self-employment taxes. 12.4% of that money goes toward Social Security, while 2.9% goes toward Medicare.
But it’s not all bleak: although your entire net income (or all your profits) is subject to Medicare taxes, only $168,600 is subject to Social Security taxes. And don’t forget that you can deduct half your self-employment taxes as a business expense.
Remember, if you need help filing your self-employment taxes and getting the biggest refund through deductions and credits, the professional tax experts on TaxGlobal can help.