Made Money From a Side Hustle in 2022? 3 Moves to Make

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Don’t gloss over any of these important tasks. 

Many people struggled with inflation in 2022 and took on a side hustle to cope with it. So if you went that route, you were in good company. Or maybe you had a different reason for working a second job in 2022, like saving up to buy a home, refurnish your apartment, or pay off your credit cards.

A 2022 report from Zapier found that 40% of Americans held down a side hustle in 2022. That’s a big jump from the 34% of people who had one as of late 2020.

But working a side hustle could have different tax implications. So if you took on a side gig last year, here are some key moves to make early on this year.

1. Gather all of your receipts and documentation

It’s important to know how much money you earned from your side hustle so you can report that information accurately to the IRS. Look through your bank account statements and tally up your total earnings. You can’t necessarily rely on your clients to give you tax forms summarizing your earnings, especially if you didn’t earn at least $600 from each one (which is the threshold that requires companies to issue a tax form).

At the same time, look at your credit card statements and gather all of your receipts so you know what deductions to claim for your side hustle. You’re allowed to deduct the costs you incurred to earn that money if you were paid on a freelance basis. So if you had to hail a rideshare to go back and forth from your tutoring gig, that’s an expense you’ll want to look at writing off.

2. Hire an accountant for help with your 2022 tax return

A side hustle has the potential to complicate your tax situation. That doesn’t mean you’ll lose out financially — it just means there may be more work to do when filing your tax return. So make a point to find yourself a good accountant for help with your 2022 taxes before we get too deep into the filing season and everyone gets booked.

3. If you’re keeping your side hustle, make plans for estimated tax payments

When you’re paid for a side hustle on a freelance basis — meaning, there are no taxes taken out of your earnings upfront — you’re supposed to pay the IRS a portion of your earnings on a quarterly basis. If you didn’t do that in 2022, and you’re continuing to work your side hustle in 2023, set up those estimated payments so you don’t forget about them. An accountant can help you calculate the right amount to pay the IRS each quarter based not just on your projected side gig wages, but your total income picture.

Working a side hustle last year may have done great things for your finances. But make these moves sooner rather than later to benefit from a tax perspective and avoid trouble with the IRS this year for failing to pay taxes on that extra income.

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