An estimated 25 percent of us now have side jobs to generate additional income. Such things as driving for a ride-share service like Uber or Lyft, dog-walking, renting on Airbnb, and freelancing on platforms like Upwork are common. These can provide extra money to cover expenses, save for a big purchase or pay down debt. These so-called “side hustles” add billions of dollars in income to the national economy each year.
If you are one of the millions working side jobs, remember this: all that additional income must be reported to the IRS and state taxing authorities.
Many Americans, particularly the “Millennials,” aren’t reporting properly – and the IRS will find it on 1099s or other filings by those who pay them. That will make them vulnerable to audits, penalties, and even criminal tax crime charges. An estimated $215 billion in side job earnings go unreported each year. That’s about $30 billion dollars in unpaid taxes the IRS is looking to come after.
Most people don’t realize that this is reportable income and estimated taxes need to be paid. That may be one thing. However, if it is deliberate and willful that the income isn’t reported, that may result in significant penalties and interest.
What are the IRS penalties and consequences? Unfortunately for those looking to evade paying taxes, the IRS is sophisticated and uses automation to identify tax cheats. When in doubt, it is generally best to err on the side of declaring too much income rather than hoping you don’t get caught by declaring too little.
If you don’t declare the income, you are running the risk of serious consequences. The IRS will assess penalties, fines, interest, and start collection actions – including levies and garnishments. In rare but extreme cases, tax evasion will be criminally prosecuted.
Don’t let an innocent mistake cost you thousands. Do you have questions about side income reporting? Did you under-report and now need help dealing with the IRS to mitigate penalties?
For answers to these and other tax-related questions, consult an expert who will help guide you through the situation.