- I was excited to make $ 30,000 in my freshman year, but I didn’t track my income or expenses.
- At tax time, I had to go back and find every dollar I made and spent to file my taxes.
- Now I use GoDaddy Bookkeeping to keep track of things and have a separate business account.
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I’m one of the 33% or more Americans who have a side business today. Making extra money doing a side business can be great. For me, however, one of the main drawbacks was figuring out how to handle taxes on my extra income.
In 2015, I got really serious about my side business and made well over $ 30,000. Although I was proud of the extra money I had made, I realized that I had made a huge mistake as the tax season rolled around – not closely tracking my income or expenses. I was so excited to be making money on a side business, but I paid for it the following spring by spending hours trying to organize my financial documents and data.
If I didn’t track my income, I didn’t know how much tax I might owe
As a freelancer or a contractor, I received some 1099 forms from companies I worked for. As long as you’re a contractor making $ 600 or more, companies will need to send you a 1099 form stating how much you’ve made. This is also sent to the IRS.
Although I had heard stories from freelance friends who received 1099 with the wrong amount of money, I was not doing a good job of keeping track of my own earnings.
At tax time, I went back and kept track of every payment I received and categorized and organized everything for my accountant.
I also didn’t track my expenses
Tracking and reporting my income was only half the battle for tax season. As a contractor, I also realized that I could write off certain expenses, which would lower my taxable income. But that meant I had to go back and track the expenses and go through the receipts to report accurate amounts.
As a freelancer, I have been able to deduct expenses for my taxes, including:
- Office supplies
- Travel expenses and conferences I have attended
- Marketing and advertising costs to find customers
- The cost of making my own business cards
- Part of my internet and phone bills
- Labor-related transaction fees
I spoke to a tax professional to find out what I can deduct, which helped cut my taxes a bit. Even so, it was a pain to organize everything and to remember all of my income and expenses for the past year. I wondered if there was a better way and strategy that could help make the tax season a little more bearable.
After speaking with my CPA, I found a better way to deal with my secondary taxes, and I’ve been using this system every year since then.
I keep my part time separate
I like to separate the finances for my secondary occupations from my main income so I don’t mix the expenses with my regular checking account. I have opened a separate checking account that I use for all of my secondary jobs and income. This helps me keep track of everything that goes in and out.
I use accounting software all year round
Now I keep track of income and expenses automatically using an affordable tool called GoDaddy Bookkeeping. It costs around $ 10 a month, but it’s worth it because it helps me keep track of all of my bills paid, expenses, and more. I can also go back and compare my earnings from previous years and create new income and expense categories as needed.
GoDaddy Bookkeeping makes it easy to create new expense categories.
GoDaddy Bookkeeping also provides timely updates and weekly reports, but I like to check in once a month to review my numbers and make adjustments if necessary.
I track my net income
GoDaddy Bookkeeping provides an income statement every month, which is important as I have to calculate my net income from sideline around tax time.
Net income is just expenses subtracted from what I’ve earned. This is the amount I pay tax on. When my husband drove for Uber for a few years, we also tracked his net income by subtracting car maintenance, repairs, and mileage expenses from his total income to get a net income.
GoDaddy Bookkeeping also provides a printable income and expense statement and worksheet for Schedule C, making it perfect for part-time workers or any business that is responsible for paying their own taxes.
Using GoDaddy Bookkeeping software helps me keep meticulous records
Side hustling has helped me grow and diversify my income so much over the years. However, one of my biggest worries was that I didn’t know how to properly report taxes on my income or worse, and that I was being audited by the IRS. The accounting software has made it so much easier to keep track of my income and expenses so that I can file my taxes without worrying about mistakes or leaving out anything.
Since I do so many everyday tasks, automatic tracking has been one of the best ways for me to meticulously record my earnings. It also helps knowing that I can focus on doing the job I love and making money rather than hiring someone to do all of the financial management for me.
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