If you’re like many people, you may do some gig work on the side in addition to your regular job – did you know you may be responsible for self-employment tax? While it’s great to make a little extra money, you need to be aware that you may need to pay taxes on that income, because while you may see it as a side hustle, Uncle Sam sees it as taxable income, just like a regular job.
Here is what you need to know about taxes and gig work.
What is considered Gig Work?
Gig work is defined as any type of work that is done on a temporary or project basis. It’s often done through an online platform that connects workers with customers who need their services. Some examples of gig work include driving for a ride-sharing service, walking dogs, or doing odd jobs for people in your neighborhood.
Do I Need to Pay Taxes on Gig Work Income?
The answer to this question is maybe. It depends on how much money you made from gig work during the year. If your total income from all sources (including gig work) is less than $12,200, then you are not required to file a tax return. However, if your income is greater than $12,200, then you will need to file a return.
In addition, if you made more than $400 from gig work during the year, you will need to pay self-employment tax. This tax consists of two parts: Social Security and Medicare. The self-employment tax rate for 2020 is 15.3%.
If you do gig work as a W2 employee, your employer should withhold taxes from your paycheck. If you do gig work as an independent contractor, you may have to pay estimated taxes. Estimated taxes are paid quarterly and are based on your expected income for the year.
What Happens if I Don’t Pay Taxes on Gig Work?
If you don’t pay taxes on your gig work income, you could be subject to penalties and interest charges. In addition, the IRS may file a tax lien against your property or assets. A tax lien is a legal claim against your property that gives the IRS the right to seize those assets if you don’t pay your taxes. So it’s definitely in your best interest to make sure that you pay any taxes owed on gig work income!
Doing gig work can be a great way to make some extra money. But it’s important to remember that you still have to pay taxes on that income. If you don’t, you could face penalties and interest charges from the IRS. So if you’re doing any gig work this year, make sure to set aside some money to pay your taxes!
How can Cheqbook help me?
If you earn income from gig work, it’s important to be aware of the tax implications, but the good news is that there are ways to reduce the burden of additional taxes. For example, you can write off 50% of self-employment taxes when you file your income taxes.
With Cheqbook, you can easily track your income and expenses and identify those that may be deductible – try it free for 30 days! Check out our blog to learn about other deductible expenses that may help you save!