4 Tax Tips for Your Side Hustle
Do you earn income from another source other than your primary job? Read on and discover some key tips which will enable you to prepare the tax return of that side hustle correctly.
Distinguish Between Hobbies and Businesses
Different jurisdictions may have different forms on which the income from a business may be reported for tax purposes in contrast to the forms on which income from hobbies can be reported. Make sure that you select the appropriate form or section as you prepare your taxes. For example, you may declare the extra income as income coming from a hobby in case you earn money from adverts which are placed on your personal blog. However, you may need to report that income as income from a business in case you are a part-time freelancer who earns money offering design or copywriting services over the weekend.
Keep Accurate Records
Make sure that you have detailed records about each aspect of your side hustle. For example, keep all the receipts for expenses that you incur. Keep those records for the duration stipulated by the tax authorities in your area. The records will help you to justify some of the deductions that you are making against the income from the side hustle. Erratic record keeping can expose you to numerous risks, such as fines when your tax return is audited and you cannot provide support documentation for the information on that form.
Consider Making Estimated Payments
Consider making quarterly payments against your estimated tax obligations in case your side hustle generates money on a regular basis. Those quarterly payments will reduce the amount of money that you may have to pay as the tax year is coming to an end. Make sure that you remit the quarterly payments in case you opt to make estimated payments. Otherwise, fines and penalties may be imposed on you if you miss making a quarterly payment when it is due.
Hire Professionals
Hire small business accountants to help you prepare your taxes. That professional will discuss your side hustle with you and identify any tax benefits or obligations which you should be aware of. His or her involvement will save you from paying more than you should, or paying less than is expected of you.
Tax preparation requires one to have intimate knowledge of the different tax laws which are applicable in the circumstances. Get help and free yourself from the burden of learning and using all the complex tax information/regulations.
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