Every time I meet a new client with a good paying job and a side hustle or side work….I get the same wink, wink when they meet me.
As I unwrap their w2 from the vault like envelope they received it in, I typically take a second to glance up at them….knowing at exactly that moment they will be winking at me (as if they are pulling off the greatest sorcery on the planet and no one can figure it out).
As I finally get the w2 open and look at “Box 1”, I always look up to that wink and listen carefully to the latest rendition of, “I definitely make more than that, I just don’t claim it. Why would I want to pay taxes when people pay me cash to do side work?”
Typically around this time I begin to explain to them how I work….or more so how I don’t work.
The key to taxes and maximizing refunds is to understand how it actually works. I am not the tax guy who makes you wait in his office waiting room that feels like the deli counter line (sometimes even smelling like it). I take the time to make sure you understand your rights, your income and your Constitutional allowed understanding of the taxes you pay.
And by the way;
Do you think if the IRS thought you not claiming your side hustle was wrong that they wouldn’t bust you and everyone of your friends they know is doing the same thing?
SMARTEN UP! THEY KNOW EVERYTHING and that is why they don’t bust you. You not claiming your side work allows them to keep your hard earned dollars instead of refunding it to you.
You see, the truth is that in 99% of side hustle cases is that you want to claim that income…..and the appropriate deductions that come with it. If you don’t, you’re kind of crazy.
I do realize you’ve never met a tax guy who will take the time to show you why you want to claim it. So no more excuses…..here it is folks….for free!
The 5 Reasons why you should be claiming your side work income…..no matter what your profession.
Rather than give you 5 technical reasons that you won’t understand like most tax guys do…I’ll give you a hypothetical scenario instead that illustrates the real world scenarios I see ten times a day January through April every year.
Mr. and Mrs. Jones pay you $5k to build a new deck on the back of their house. (Instead of a deck you can insert instead; a website, nanny their kids, clean their house, paint their dining room, etc, etc).
There is a big difference between what someone pays you to build a deck and the ACTUAL tax liability you have to pay on that. What do I mean? Here, look at these 5 Reasons:
1) You bought material for that deck, say $3k worth. Now that $5k side work is only liable for $2k left of profit for tax purposes.
2) You paid a friend $200 to help you build it on a Saturday. You don’t have to pay payroll taxes on that $200 but you do get to deduct it. Now your “profit” or taxable income is $1800. Get it yet?
3) Now, think about this? How did you get the job? Did the Jone’s call your cell phone to request an estimate? Probably yes which means your cell phone bill is now deductible. Assuming that’s $100 per month, you can deduct that $1200 yearly bill from the $1800 from number 2 above. You’re already down to $600 of “profit”.
4) Did you drive to the site? Of course. What if you now deduct your mileage or your car payment and insurance? How much would that reduce your “profit”?
5) You didn’t build the deck with your bare hands right? How much are your tools worth? Do you get it yet now?
The list goes on and on…..
So now that you’ve got the Accounting 101 lesson for free; what happens with all those deductions that created a loss?
Answer: They apply against the taxes taken from your regular paycheck thereby increasing your refund!
It really is that simple folks.
So the lesson is; be smart. If you don’t know what you’re doing reach out and I’ll show you how to maximize what you keep in your pocket.