Many people with entrepreneurial desires take something that has been a hobby and convert it into a business. Other people discover something that they could do with their spare time that will produce additional income. It has been said that if you want to get ahead financially, you must find something outside of job income to make that happen, whether that would be investing, or shifting from a job to owning your own business or creating one of these side-gigs.
Whether you buy a kiosk in a shopping center and have someone else operate it for you or rent parking spaces on your large lot that is across the street from an activities venue, or drive in the evenings for Uber or Lyft, or selling homemade craft items over the internet, these are all potential businesses that can earn significant income and also require you to register as a business and pay taxes on your income. This article is to encourage you to treat these side-gigs as a serious business, and to take the steps necessary not only to ensure the survival of that business and income but to satisfy governmental requirements. Treating it as a hobby does not help pay your taxes if you get audited.
The IRS refers to this as the gig economy and has this to say to define it. “The gig economy—also called sharing economy or access economy—is activity where people earn income providing on-demand work, services or goods. Often, it’s through a digital platform like an app or website.”
The IRS also indicates that often the methods of reporting or accounting for income are different than standard reporting, but the income is still taxable. That income may:
- Be paid in cash, goods, property, or even virtual currency.
- Not be reported on W-2 or any of the 1099 income statements.
- Come from side work that could also be temporary or part time.
Please note that the responsibility to keep track of this income, make sure that you have supporting documents in the event of an audit, and to report it on your tax returns is exclusively yours. If you need assistance with any of these things, then consult with a tax accountant who has some experience with side-gigs with other people.
The advantage of having a side-gig is that it is often something that you can do on your own, and if your ideas are good ones, it can evolve into a business that would be full time, and even allow you to employ or contract with other people to assist you in growing and fulfilling on the business.
If you are looking to create our own side-gig, consider checking some of the digital platforms that can be found online that are connected to apps or websites, and are designed to match service or product providers with customers. Some of the categories for these digital platforms are Property and Space Rentals, On Demand labor or repair type services, Delivery or Ridesharing services, and Craft or handmade item marketplaces.
The opportunities are endless, you do not have to quit a job to participate in them, and you may find something that you enjoy and that helps you get ahead financially. From a government perspective, they wholeheartedly support this gig-economy approach, and have provided some helpful insights as well as a webinar on “Understanding the Gig Economy.” See the resource listed below from the IRS website for access to this additional informative information.