T Nation

Tax Question Regarding Side Business


#1

I make money on the side selling with no permit. How could I get the money in the bank and pay taxes? I considered just keeping it in cash but, I make a decent amount monthly and would prefer to get it in the bank.


#2

This is just what I know from personal experience, so take it with a grain of salt. Paying income tax is easy; simply file a Schedule C (Profit & Loss from business) with your regular return to report the income. If you’re asking about sales tax, you file a return with your state for that. In my state (Mississippi) you can get the information on that on the state tax commission website.


#3

You can file income on your tax return from side gigs without getting an EIN. The IRS has rules about what qualifies as a hobby business vs a bona fide business. They’re pretty simple. Deductions for hobby businesses are restricted. So you’ll pay more than if you had an EIN and filed a biz return.


#4

The easiest way to keep track of side money and expenses for tax reasons. Open a separate checking account and only put side money and draw expenses out of it. And profits write a check to you personal account. Remember to make car payments insurance gas that is business related out of business account. Don’t use after tax money to pay business expenses. That is all pre taxes. Any money put in personal account needs to be reported as income. All the information you need to fill out a schedule C business income and loss form is found on this checking accounts check book register.
And do not worry about being called a hobby. That has nothing to do with having an EIN. So long as you are making a profit you are not a hobby. If your using your business as a tax dodge and always lose money on it. Then you are a hobby


#5

Good advice from Verne…as is usually the case.