When you’re willing to do just about anything for some extra cash, whether it’s going toward your debt or your rainy day fund, your year looks a little like this:
April through December: Hustle hustle hustle hustle hustle
January through April: Oh crap, what is this hustle going to do to my taxes???
Earning more can quickly turn into a “more money, more problems” situation. And if you’re new to earning extra from side gigs alongside your day job, you might be in for a surprise when it’s time to file your annual return.
Additional income can throw you into a new tax bracket. It can also put you over the threshold for assistance paying for health care or getting other government benefits.
Is there any way around it?
Do You Really Have to Report All Your Random Bits of Extra Income?
A member of our community group asked, “Is there any way to make money or gift cards that isn’t going to have to be filed our taxes as income?”
In short… no.
Any service that allows you to make side income, whether it be a mystery shopping company, Uber or a survey-taking site, is paying you taxable income.
The IRS requires any company that pays you more than $600 in a calendar year to collect a W-9 tax form from you. At the end of the year, it sends you a 1099 document with the amount you earned.
1099s or Not, You Still Have to Report All Your Income
What if a company doesn’t ask for a W-9 or send you a 1099? Regardless of how much you made, you still need to report the income to stay on the up and up with the IRS.
You should be especially aware of your duty to report your income if you get paid exclusively through PayPal. For example, if you wrote a couple of guest posts for a blog that paid you via PayPal, you won’t get a 1099 from that website. And you’ll only get a 1099 from PayPal if you either receive $20,000 or more than 200 payments through your PayPal account in one year.
It’s on you to report your income as accurately as you can.
If you get paid in gift cards or non-cash prizes, you still need to claim the cash value, Survey Police notes.
“Keep check stubs on file and keep track of any PayPal payments you receive, in case of an audit,” Survey Police advises.
“But I’m just doing this for fun!” you might say. Still, you must claim hobby income on your taxes. If you spend considerable time and effort on this side-whatever, it’s probably a side hustle, not a hobby.
‘Under the Table’ Doesn’t Really Exist Anymore
There’s only one type of side gig that might fly under the radar of the IRS: a cash gig. If you go around the neighborhood after a snowstorm asking for $20 per driveway, you could, in theory, not report that income.*
That couple of days you watched your friend’s cat and watered her plants? The IRS probably won’t come after you if you don’t report the cash she hands you when she gets back from vacation.
But if you start taking clients on DogVacay? Suddenly, there’s lots of evidence that you’re trying to make money. If you’re earning money or prizes through an app or website, there’s no use trying to hide it. You may be able to skate under the radar for a while, but if you ever get audited, the heartburn could be brutal.
*Let’s be serious, you know we’re not recommending you evade your taxes in any way, shape or form.
Your Turn: Do you make extra income through apps or market research programs? How do you keep track of your earnings?
Lisa Rowan is a writer and producer at The Penny Hoarder.
This was originally published on The Penny Hoarder, one of the largest personal finance websites. We help millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. In 2016, Inc. 500 ranked The Penny Hoarder as the No. 1 fastest-growing private media company in the U.S.source The Penny Hoarder http://ift.tt/2nXrrLN
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