Multiple Side Hustles, One Big Tax Headache

The Rise of the Multi-Hustler Economy

Welcome to the new normal, in which one salary is no longer the objective.  TikTok sponsorships, Etsy crafts, and freelance design work are all ways Gen Z entrepreneurs monetize their businesses.  It's innovative, empowering, and frequently more profitable than standard 9-to-5 work.

But what happens during tax season?  Things quickly become messy.

Each platform—Shopify, Venmo, Upwork, or TikTok—has its own set of reporting requirements, and the IRS expects you to keep track of every dollar of income and deductible expenses.  Missing a 1099-K or a quarterly tax payment can transform your side hustle triumph into a tax nightmare.

Where Side Hustlers Get Tripped Up

Here are the major pitfalls we notice each year:

• Missing Estimated Tax Payments:When you work for yourself, no one will withhold taxes for you.  If you earn more than $1,000 in untaxed income, you may be required to make quarterly projected payments.  If you miss them, the penalties will build up rapidly.
• Mixing Personal and Business Finances:

• Ignoring Entity Selection:

        As income grows, remaining a sole proprietor may not be the best decision.  The proper business form (such           as an LLC or S corp) can save taxes and protect personal assets.

• Overlooking Deductible Expense:Creators and freelancers frequently forget that expenses such as software, internet, phone bills, and even a portion of their home office might be tax deductible.  Tracking these effectively can make a significant difference in what you owe.

How to Stay Out of Trouble (and Keep More of What You Earn)

Managing various income streams does not have to result in mayhem.  Here's how to stay organized and stress-free:

1. Create a separate business bank account for your income and expenses.

2. Track transactions using accounting software or by hiring a bookkeeper, even if just part-time.

3. Save 25-30% of your salary for taxes so you're never caught off surprise.

4. Consult a tax specialist as soon as possible, especially if you get income from various sources.  They can assist you in planning ahead, estimating quarterly payments, and determining the optimal corporate form for your needs.

Bottom Line

Multiple side hustles can lead to more opportunities, but also more opportunity for tax blunders.  With the correct systems (and counsel), you can keep your accounts clean, stay compliant, and see your efforts pay off.

Do you need help organizing your side hustle revenue or arranging your taxes?  Contact our firm today to receive tailored advice.