Hey Reader,

Tax season is here, and with it comes the dread.

I used to absolutely hate doing my taxes when I first started freelancing on the side of my day job. I couldn't wrap my head around how much I should save from my side hustle earnings or at what amount do I even have to start paying taxes.

Several years later (and several mistakes later), I finally got the hang of it. So -- here's a little crash course to help you get up to speed with your own side hustle taxes.

(I also recently wrote about my side hustle taxes for CNET. You can read that full article here.)

First things first, freelancers pay two types of taxes: Self-employment and income taxes.

Any income you make that's not taxed is usually considered self-employment income, and you're responsible for paying both self-employment tax and income tax on those earnings. That's an important distinction -- if you just calculate income tax, you could end up with a surprise tax bill.

Self-employment tax requires you to pay 15.3% of your total earnings. This tax is levied to pay into Social Security and Medicare (yea, social security isn't a hand out - you pay into that throughout your life at any job you have, side hustle, business, you name it.)

When you work a traditional job, your employer usually covers half of this cost. When you're self-employed, you're responsible for paying both the employee and employer portions.

SO that self-employment tax is what you pay as estimated taxes. Since you won't pay income tax each time you get paid, like you would as a W-2 employee, the IRS requires you to make quarterly estimated tax payments if you expect to owe $1,000 or more for the year. Depending on the state you live in, you may also need to make estimated payments to your state's department of revenue.

But, how do you even track these? I use an accountant to help stay on top of mine, but also love the tool, Lunafi, which automates tracking both your taxes at your day job AND your side hustle.

All this is great to know for tracking your taxes throughout the year, but what about the HERE AND NOW!? It's tax preparation season and many of you may still be putting off filing your taxes. I did until Monday (lol).

When filing your taxes, make sure you have all of your 1099s from your clients, affiliates, etc.

There are three possible types of 1099s freelancers could receive: a 1099-NEC, 1099-K or a 1099-MISC. Although the IRS is tightening up on 1099 requirements, there's still a chance you won't receive a 1099 for freelance work you completed. Even if this happens, it's still your responsibility to report these wages (that's why we track them!).

If you're weary of filing your taxes yourself, there are free tax preparation programs available to qualifying individuals through the Volunteer Income Tax Assistance (VITA) program offered by the IRS. To qualify, your income must be below $60,000. Another free option to use is FreeTaxUSA.

Alright, I hope that helps! Feel free to respond to this email with any questions you have!

If you're looking to start a side hustle, head over to my side hustle course which is 40% off until next week! We have a whole section in the course that covers side hustle taxes, including videos with an accountant and tax attorney 😍

In other news, I have something important to share with you all but will hold off on sharing that until next week.

Until then,

Daniella ♥️♥️

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