Don't Mess With Taxes

The COVID-19 pandemic ignited an explosion of side hustles, with many folks cobbling together multiple independent operations to replace traditional jobs lost to the virus.

The U.S. economy has picked up, and many businesses are forcing bringing their former and work-from-home staff back into the office.

But side hustles remain popular.

Most side hustle for more than money: Even where they have wage-paying work, many Americans also have side jobs, according to a survey by Insuranks, a small business insurance marketplace.

Ninety-three percent of the adults surveyed by Insuranks said they have an added job alongside their main employment positions. Nearly 80 percent of them work full-time. Both full- and part-time work respondents said they devote an average of 13 hours per week to their side hustles.

Most in the survey offered a dual reason for their added job(s). Sixty-three percent said they took on side hustles "for something to do and bit of extra cash."

Forty-four percent said financial needs were the reason. The side hustle cash helped them make ends meet and/or cover bills.

Twenty-eight percent said the side hustle money helped them deal with inflation costs. Another 26 percent are using the money to more quickly pay off debt.

But nearly a third, 32 percent, said finances weren't the main reason for their side hustle. They do the extra job because they enjoy it. In fact, nearly half (49 percent) said they would quit their full-time job if they made enough money off their side hustle.

More tax tasks: Another thing more side hustlers have in common is added tax duties. The added independent income means they typically must pay estimated taxes.

And the third estimated tax payment of 2022 is due this week, on Thursday, Sept. 15.

The estimated tax system helps ensure that self-employed workers, which is what side hustle folks are, participate in the same pay-as-you-earn system as individuals who get paychecks that are reduced by withholding for income taxes, as well as Federal Insurance Contributions Act (FICA) amounts for Social Security and Medicare.

When you have a gig job, you have to take care of these tax payments on your own by directly sending the appropriate amounts to the Internal Revenue Service as estimated tax amounts.

Don't miss the 4 deadlines: Most long-time readers of the ol' blog know that the main payment method is four equal installments on the 15th of April, June, September, and the following January.

The table below shows the IRS' not-quite-normal collection calendar.

My earlier posts, The scoop on paying estimated taxes and A quick estimated tax Q&A in advance of the April 18 deadline, have more on the estimated tax payment process.

But for now, the key thing to know is that there's a 1040-ES voucher — that's the IRS form, shown below, that you send with your payment if you pay the old-fashioned paper way — deadline this week.

See more tax forms and more about them at Talking Tax Forms.

Don't miss it, or any of the estimated tax due dates. If you do, the IRS could ding you with penalties for not paying on time as well as not paying a legitimately estimated amount.

Other ES considerations: There are some situations where your four estimated tax payments don't have to be the same amount. This is allowed when your income not subject to withholding is unequal during the year. In this case, use the annualized income option to calculate each of the four payments.

And speaking of calculating, IRS.gov's online Tax Withholding Estimator can help. While it was designed to help wage-earning workers more accurately adjust their paycheck withholding, it also has options for retirees and self-employed individuals who face estimated tax payments.

As for making your estimated tax payments, you can, as noted earlier, mail a check or money order made payable to the U.S. Treasury. As long as the envelope is postmarked Sept. 15, the IRS considers your estimated payment as being made on time.

Or you can take advantage of one of the many electronic tax payment options offered by the IRS.

Again, regardless of which payment method you use, just do it by this Thursday, Sept. 15.

You also might find these items of interest:

• How to avoid estimated tax penalties
• 3 ways to navigate estimated tax penalty safe harbors
• Paying self-employment taxes on the revised Schedule SE  
• Estimated taxes due Sept. 15, but House bill proposes calendar changes

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