Millions of people have diversified the way they earn income and joined the gig economy. This could be a side gig to help them meet financial goals, running their own small business, a second job, or even multiple side gigs. Like any income, you must report income from your multiple sources or side gigs and file specific forms when you file your taxes.
Don’t worry about reporting self-employment income from multiple sources and knowing which tax forms to report your self-employment income. TurboTax Self-Employed will easily guide you through reporting your self-employment income and deductible expenses. You can also jump-start your taxes by snapping a photo of your 1099-NEC that reports your self-employment income or importing your information from hundreds of financial institutions.
Although TurboTax Self-Employed helps you easily report your self-employment income from multiple sources and your deductible business expenses, here is a breakdown of some things you should know about reporting self-employment income from multiple sources.
Reporting Your Income
For tax year 2021, if you received payments totaling $600 or more from any one of your side jobs during the tax year a company or individual paid you, they should supply you with a Form 1099-NEC for the nonemployee compensation. The company or individual should also supply a copy of this form to the IRS to report your income.
If you accepted credit cards, debit cards, or prepaid cards and had over $20,000 in sales and more than 200 individual transactions through a third-party processor like PayPal or a rideshare platform you may also receive a Form 1099-K.
Under the American Rescue Plan, changes were made to Form 1099-K reporting requirements for third-party payment networks like Venmo and Cash App that process credit/debit card payments or electronic payment transfers. The change begins with transactions starting January 2022, so it doesn’t impact 2021 taxes.
Beginning with tax year 2022 if someone receives payment for goods and services through a third- party payment network, their income will be reported on Form 1099-K if $600 or more was processed as opposed to the current Form 1099-K reporting requirement of 200 transactions and $20,000. This change could impact people working in the gig economy, online sellers, independent contractors, and other self-employed business owners.
However, regardless of the amount (even if it’s less than $600) or if the payer did not send out the form, in general you still have to report your earnings on your taxes. The IRS requires you to report self-employment income if your net income (business income minus business expenses) from your business is $400 or more since you are also required to pay self-employment taxes on your net income.
You may be wondering, “What if I was paid in cash or via a mobile payment service like Venmo?” If you were paid in cash or via a mobile payment service for your services you are still required to report your cash earnings as business income.
Where Are My Earnings from My Side Gig Reported?
In most cases, if you have nonemployee compensation, your self-employment income and business expenses will be reported on a Form Schedule C which reports the profit or loss from your business and accompanies your Form 1040 when you file your taxes. When you complete your taxes with TurboTax Self-Employed, you will be asked simple questions about you and your business, and TurboTax Self-Employed will help you easily and accurately report your business income and deductible business expenses.
How Do You Report Income from Different Side Gigs?
If you have one or more side jobs, filing your taxes isn’t much different unless your jobs and sources of income are very different from each other. If they are very different, then you may need to attach multiple Schedule Cs to your tax return.
For jobs that are in the same or similar line of business can typically be reported on one Schedule C. But don’t be too concerned about selecting the right number of Schedule Cs, TurboTax has you covered and will help you to properly report your income.
For example, if you sell cake toppers on Etsy and also drive for a ridesharing company, you will have to report the income and expenses for those businesses on two separate Schedule Cs. However, if you sell cake toppers on Etsy and also have a business of making and selling cakes you could combine those businesses on one schedule C as these businesses overlap and can be in the same field of cakes and cake decorating.
What Expenses Offset Self-Employment Income?
Sometimes your side hustle or business might not yield a profit after all of your business expenses are taken into account. Tracking your deductible business expenses is just as important as tracking your business income since your expenses directly related to your business can help lower your taxable business income and your self-employment taxes. After you have gathered all the 1099s, cash, and checks you may have received over the year, you will need to do the same for your expenses.
Some common business expenses claimed on a Schedule C can include:
- Home Office Deduction
- Legal and professional fees
- Car expenses
- Taxes and Licenses
While these are some of the common expenses, the Form Schedule C has many other categories to help classify your expenses related to your business or side gig.
TurboTax Self-Employed identifies industry-specific deductions directly related to your industry so you don’t forget anything, including many you may not be aware of.
With QuickBooks Self-Employed, you can also track your business income, expenses, and mileage year-round and export the information directly to your TurboTax Self-Employed tax return at tax time eliminating data entry.
What is Self-Employment Tax?
Everyone who earns income is required to contribute Social Security and Medicare taxes. When you work as an employee for a company, your employer withholds 7.65% of Social Security and Medicare taxes from your wages. Your employer then matches the 7.65% and sends the entire 15.3% of taxes to the IRS.
However, when you are self-employed (whether you run your business full time or if you have a part-time side gig) and your net income is $400 or more, you are responsible for filing a tax return and paying the entire 15.3% of Social Security and Medicare taxes when you file which are known as self-employment taxes. The self-employment tax rate is 15.3% and consists of 12.4% for Social Security and 2.9% for Medicare. Though all of your net income (profits) from the business are subject to the Medicare portion of the self-employment tax, only the first $142,00 of your net income is subject to the Social Security portion for tax year 2021 ($137,700 for tax year 2020).
One thing to keep in mind, you are also able to deduct half of your self-employment taxes lowering your taxable income.
When you file your taxes with TurboTax Self-Employed, your self-employment tax is automatically calculated based on your net profit (business income minus business expenses), and the deduction for half of your self-employment taxes is automatically calculated and put on the correct tax forms.
We’ve Got You Covered
Don’t worry about knowing these tax laws. TurboTax Self-Employed will ask you simple questions about you and your business and give you the business deductions and credits you’re eligible for. TurboTax Self-Employed identifies industry-specific deductions related to your specific business, including some you may not have even known you are eligible for.
If you have questions, you can connect live via one-way video to a TurboTax Live Self-Employed tax expert with an average of 12 years of experience to get your tax questions answered. TurboTax Live Self-Employed tax experts are available, year-round in English and Spanish, and can also review, sign, and file your tax return — or you can just hand over your taxes to them — all from the comfort of your home.
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Written by Katharina Reekmans
Katharina Reekmans is an Enrolled Agent and a contributor to the TurboTax Blog team. Katharina has years of experience in tax preparation and representation before the IRS. Her passions surround financial literary and tax law interpretation. She has a strong commitment to using all resources and knowledge to best serve the interest of clients. Katharina has worked as a senior tax accountant, operations manager, and controller. Katharina prides herself on unraveling tax laws so that the average person can understand them. More from Katharina Reekmans
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Sole traders can have more than one business, but should remember that they're not legally separate from each sole trader business they have. This means that you must consider all of your sole trader income from each business to make sure you register for VAT when you're supposed to.How do I pay tax on a second job self employed? ›
If your second job is on a self-employed basis, you'll pay tax through Self Assessment and won't need a tax code. You will however have a tax code for your employed job. This is because tax codes are part of the PAYE system and used by HMRC to tell your employer how much tax to deduct from your pay.How do I report self employment earnings? ›
- Independent contractors report their income on Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship).
- Also file Schedule SE (Form 1040), Self-Employment Tax if net earnings from self-employment are $400 or more. ...
- You may need to make estimated tax payments.
- Sign in to your account, select Pick up where you left off.
- To the right upper corner, in the search box, type in "other reportable income" and Enter.
- Select Jump to other reportable income.
- Next screen, Other Wages Received, select No to continue.
Bottom line, you can have multiple businesses under one sole proprietorship. But, the business activities must be very different from each other. TIP: When you have multiple businesses operating under one sole proprietorship, if one business gets sued, both businesses' assets are at risk.How do I file taxes if I have two businesses? ›
Most often, you report your business income and expenses on Schedule C of Form 1040. If you have multiple unrelated businesses organized as sole proprietorships, you generally should prepare separate Schedule C forms for each to report your business income or losses.Do I have to pay self-employment tax if I have another job? ›
If you have a second job as an independent contractor, you'll have to pay self-employment taxes on the income you receive. By Stephen Fishman, J.D. If you moonlight (have a second job) as an independent contractor, you'll have to pay self-employment taxes on the income you receive.How much money can you make on a hobby before paying tax? ›
There is no set dollar limit, because some hobbies are more expensive than others. One of the reasons a hobby is not considered to be a business is that typically hobbies makes little or no profit.Can I be self-employed and have another job? ›
You can be both employed and self-employed at the same time, for example if you work for an employer during the day and run your own business in the evenings. You can check whether you're self-employed: online. by phone.How do I report self-employment income on TurboTax without a 1099? ›
Schedule C will feature your business expenses and income. You can simply include your cash income with your “gross receipts” on the first line of the form. Also, every income you received that does not have a 1099 form should be included in this section.
Self-employed taxpayers report their business income and expenses on Schedule C. TurboTax can help make the job easier. Use Schedule C to calculate whether your business had a taxable profit or a deductible loss.What happens if you dont report self-employment income? ›
Not reporting self-employment income is a serious issue and a federal and state crime. This is a form of tax evasion. You will incur a fee on the amount not paid, interest will be charged on the amount not paid, and you may be arrested and sent to prison for failing to pay your taxes.What counts as additional income? ›
You typically have to report other income if you receive money or goods that aren't included on a W-2 or on most 1099s. Think prizes, awards, jury duty pay, and lottery winnings. Additional sources of income that you might report as other income include: Gambling winnings.How do I report additional income? ›
So How Do I Report It? In most cases, side gig income is considered self-employment income and should be reported on the IRS Schedule C, Profit or Loss from Business.What item should not be included in income? ›
Income excluded from the IRS's calculation of your income tax includes life insurance death benefit proceeds, child support, welfare, and municipal bond income. The exclusion rule is generally, if your "income" cannot be used as or to acquire food or shelter, it's not taxable.What do you call a business that does multiple things? ›
A conglomerate is a corporation made up of several different, independent businesses. In a conglomerate, one company owns a controlling stake in smaller companies that each conduct business operations separately. Conglomerates can be created in several ways, including mergers or acquisitions.Can I run multiple businesses under one company? ›
The answer is yes--it is possible and permissible to operate multiple businesses under one LLC. Many entrepreneurs who opt to do this use what is called a "Fictitious Name Statement" or a "DBA" (also known as a "Doing Business As") to operate an additional business under a different name.Is it better to have multiple businesses under one LLC? ›
While it might seem tedious or require additional effort to set up a separate LLC for your new business idea, it's often a better route to take than running both businesses under your current LLC.Can a person be proprietor in two firms? ›
Yes, Proprietorship Firms can generally have Multiple Businesses. There are no restrictions on the number of businesses you can operate as sole-proprietors.Can I deduct home office expenses for two businesses? ›
You can claim the home office deduction if you have a dedicated workspace in your home for an office. This area can't be used for personal activities. To claim it for two different businesses, the office space must qualify as the principal place of business for both.
Generally speaking, if you have two or more separate business activities, you can't report them both on the same Schedule C. You need to complete a Schedule C for each business.What is the self-employment tax on $20000? ›
Remember, too, that you'll also have to pay income taxes on the $20,000 that you've earned. If you are filing as a single taxpayer or are married and filing jointly, you'll fall into the 12% tax bracket on that $20,000 of freelance income.How does having multiple jobs affect taxes? ›
The U.S. tax system is progressive. Tax rates increase as you earn more. It could change your tax bracket if you get a second job, and your income increases enough to push you into the next-highest bracket. You'll be giving the IRS 10% more in tax on most of your second job's earnings.Can I earn money from a hobby without paying tax? ›
From painting and pottery to scrapbooking and soapmaking, these activities can be sources of both fun and finances. Taxpayers who make money from a hobby must report that income on their tax return. If someone has a business, they operate the business to make a profit.How does IRS determine hobby vs business? ›
These factors are whether:
The taxpayer carries out activity in a businesslike manner and maintains complete and accurate books and records. The taxpayer puts time and effort into the activity to show they intend to make it profitable. The taxpayer depends on income from the activity for their livelihood.
- Sign in to your TurboTax account.
- Click on Federal Taxes tab.
- Choose Wages and Income.
- Scroll down to Less Common Income and click Start to to right of Miscellaneous Income, 1099-A, 1099-C.
- Click Start to right of Hobby income and expenses.
An activity is considered a business if it is done with the expectation of making a profit, while a hobby is considered a not-for-profit activity. The IRS uses a list of factors to determine whether an activity meets the criteria of a business, making determinations on a case-by-case basis.Does freelance work count as a second job? ›
You register for Self Assessment online via the Government Gateway platform and HMRC recommends that you do it as soon as possible. Even if you're earning a relatively small amount from freelancing, it's still additional income that you must declare because Income Tax may be due on those earnings.Do I need to pay tax on side hustle? ›
The amount of Income tax and National Insurance you'll pay depends on how much you make from your side gig. It also depends on how much you earn in your employed job. You might find that the money from your side gig pushes your overall earnings into a higher tax band, meaning that you'll pay more tax on those earnings.Do I have to declare self-employed income under 1000? ›
If your income is less than £1,000, you don't need to declare it. If your income is more than £1,000, you'll need to register with HMRC and fill in a Self Assessment Tax Return. However, it's important to remember that if you claim this allowance, you can't deduct business expenses.
If you earn hobby income, you must report the income on Schedule 1, Additional Income and Adjustments to Income. Schedule 1 gets attached to your Form 1040.How do I report babysitting income in TurboTax? ›
In this case, you might receive a Form 1099-NEC if you earned between $600 and $2,300 in 2021 or $2,400 in 2022. Regardless of whether you receive a Form 1099-NEC, you will need to report your income on Form 1040, Schedule C. This schedule is for reporting profits or losses from a business.
Not everyone is required to file or pay taxes. Depending on your age, filing status, and dependents, for the 2022 tax year, the gross income threshold for filing taxes is between $12,550 and $28,500. If you have self-employment income, you're required to report your income and file taxes if you make $400 or more.Is TurboTax easy for self-employed? ›
While preparing your taxes may not be the most enjoyable activity, there's no reason why it can't be easy. Believe it or not, TurboTax Self-Employed really does make the process easy, particularly for small business owners who may be struggling with completing a Schedule C for the first time.Do I need to report self-employment income less than 400? ›
You have to file an income tax return if your net earnings from self-employment were $400 or more. If your net earnings from self-employment were less than $400, you still have to file an income tax return if you meet any other filing requirement listed in the Form 1040 and 1040-SR instructionsPDF.What counts as self-employed income? ›
The net income you earn from your own trade or business. For example, any net income (profit) you earn from goods you sell or services you provide to others counts as self-employment income. Self-employment income could also come from a distributive share from a partnership.Do self-employed get audited more? ›
The IRS claims that most tax cheats are in the ranks of the self-employed, so it is not surprising that the IRS scrutinizes this group closely. As a result, the self-employed are more likely to get audited than regular employees.Will the IRS let me know if I made a mistake? ›
If the IRS finds a mistake, you will likely receive a letter in the mail notifying you of it. You may face an audit if, however, your mistake is more serious, such as underreporting income. Audits usually begin with a letter asking for more information. The IRS does not catch every mistake on a tax return.How do I show proof of income if I get paid cash? ›
- #1: Create a Paystub. ...
- #2: Keep an Updated Spreadsheet. ...
- #3: Bookkeeping Software. ...
- #4: Always Deposit the Payment and Print Bank Records. ...
- #5: Put it in Writing. ...
- #6: Create Your Own Receipts. ...
- #7: Utilize Your Tax Documents. ...
- #8: Use an App.
If your second job is on a self-employed basis, you'll pay tax through Self Assessment and won't need a tax code. You will however have a tax code for your employed job. This is because tax codes are part of the PAYE system and used by HMRC to tell your employer how much tax to deduct from your pay.
- Set aside 20–35% of your side hustle income for taxes. ...
- Find out if you need to pay estimated taxes. ...
- Open a separate checking account for side hustle expenses. ...
- Create a simple record-keeping system. ...
- Get help from a tax professional.
Payments for side hustle income through online payment services like PayPal are reported through the 1099-K form. These forms are sent to the IRS to report federal income taxes by the payer. Self-employment income from payers that send these 1099 forms is to be sent by January 31st.Can I have 2 self-employed businesses? ›
Sole traders can have more than one business, but should remember that they're not legally separate from each sole trader business they have. This means that you must consider all of your sole trader income from each business to make sure you register for VAT when you're supposed to.Is selling online considered self-employed? ›
Whether you're saying goodbye to your most prized childhood possessions or old items from the closet, selling your stuff can be a form of self-employment. Amazon, eBay, Craigslist, and other e-commerce websites and apps give your goods great exposure and make the selling process relatively safe and easy.Do I have to pay self-employment tax on a side business? ›
You must file a tax return if you have net earnings from self-employment of $400 or more from gig work, even if it's a side job, part-time or temporary. You must pay tax on income you earn from gig work. If you do gig work as an employee, your employer should withhold tax from your paycheck.What are 3 items that are not taxable? ›
- Inheritances, gifts and bequests.
- Cash rebates on items you purchase from a retailer, manufacturer or dealer.
- Alimony payments (for divorce decrees finalized after 2018)
- Child support payments.
- Most healthcare benefits.
- Money that is reimbursed from qualifying adoptions.
- Welfare payments.
Which taxpayers pay income tax at the highest rates and the lowest rates? (The highest tax rates apply to taxpayers who use the married filing separately filing status. The lowest tax rates apply to taxpayers who use either the married filing jointly or qualified widow(er) with dependent child filing status.)How much can I make before I have to file taxes 2022? ›
Under age 65. Single. Don't have any special circumstances that require you to file (like self-employment income) Earn less than $12,950 (which is the 2022 standard deduction for a single taxpayer)Can I have 2 UTR numbers? ›
Do I need more than one UTR number? You cannot get more than one UTR number for a limited company, nor can you get more than one personal UTR for Self Assessment.Can I run 2 business as a sole trader? ›
Technically, yes. It can be common for individuals operating under a sole trader structure to run two separate small businesses. For example, one business making wedding invitations and another baking wedding cakes.
Disaggregation is when business owners seek to avoid charging VAT by splitting their business into different parts to ensure each operates under the VAT registration threshold. For a limited company, some business owners may look to establish separate companies. A sole trader may seek to establish separate trades.Can two businesses run under one name? ›
The answer is yes--it is possible and permissible to operate multiple businesses under one LLC. Many entrepreneurs who opt to do this use what is called a "Fictitious Name Statement" or a "DBA" (also known as a "Doing Business As") to operate an additional business under a different name.Is a UTR number for life? ›
Your UTR number will remain the same throughout your entire life, just like your National Insurance Number. HMRC uses your UTR number to keep tabs on your tax obligations.Can I check someone's UTR number? ›
6. How Can I Check a Tax Reference Number? You can check a UTR number by calling HMRC on 0300 200 3310 or by going online. UTR numbers are highly confidential since they are used by HMRC as part of the identification process when accessing information about an individuals taxes.Is a UTR number only for self-employed? ›
You won't receive a UTR number unless you're registered as either self employed or as starting a new business. You'll need to do this on HMRC's website. Alternatively, you can call them on 0300 200 3310. There is no charge for doing either.What's the best way to legally structure multiple businesses? ›
- Create Separate LLCs or Corporations. You can create separate LLCs or corporations for each of your businesses, because there's no limit to how many a person can form. ...
- Create Multiple DBAs Under One LLC or Corporation. ...
- Create Businesses Under a Holding Company.
Another way to structure multiple businesses under one LLC is to set up a holding company. Under this option, you would create separate LLCs for each new business venture and “hold” them under your primary LLC. This arrangement is also referred to as an umbrella company or parent company.Can you register as self employed twice? ›
Having more than one sole trader business does not need re-registering for self-employment. If you do this, HMRC will assign you a new UTR number and require you to file separate tax returns for each company. Instead, you'll file a single Self-Assessment tax return, with a section for each company.How do I avoid hitting VAT threshold? ›
Other ways to prevent your company from paying VAT are to avoid getting your customers to purchase materials themselves, not taking large one-off payments, and operating on fewer days a week.Can I split my business into two? ›
A demerger can either result in two separate businesses, each with the same shareholders holding same proportions in the new ownership structures (mirroring the pre-demerger ownership); or it can be a partition demerger, which is where the demerged business has only a few of the original shareholders.
After exceeding the supply threshold, you have 30 days to register for VAT. If you don't, you usually have to pay a penalty – the amount of which depends on whether you reported the error independently or HMRC noticed it yourself, and whether it was an oversight or you deliberately tried to deceive HMRC.What is it called when you own multiple businesses? ›
A conglomerate is a corporation made up of several different, independent businesses. In a conglomerate, one company owns a controlling stake in smaller companies that each conduct business operations separately. Conglomerates can be created in several ways, including mergers or acquisitions.Is it better to have multiple LLC or DBA? ›
Having multiples DBAs will not protect the assets and income of each DBA from the other DBAs. If one of your DBAs gets sued, all other DBAs under the LLC name will be liable. For liability protection purposes, it is better to have multiple LLCs for each of your businesses.Is it better to have multiple businesses under one LLC? ›
While it might seem tedious or require additional effort to set up a separate LLC for your new business idea, it's often a better route to take than running both businesses under your current LLC.