It seems as if suddenly everyone has a side hustle. Your sister is selling essential oils, your brother-in-law is flipping houses, your cousin has a blog, and your kid’s soccer coach is on YouTube. Side hustles can be an excellent way to supplement income, to build a business without quitting your day job, or just to fulfill a dream. Many are doing it very successfully, but some are finding themselves in hot water because they didn’t realize that the government sees their “dabbling” as a business. So, let’s look at how to keep your side hustle from becoming a major headache.
- Acknowledge that you are RUNNING A BUSINESS. Whether you are selling products at home parties, selling on Etsy, or posting affiliate links on your blog, you are running a business. Make sure you have met all your state requirements for your type of side business. Most states have a website where you can go to find out what you need to do–from registering your business name to getting a resale license, or registering to collect and remit sales taxes.
- Separate your funds. Keep your side hustle funds separate from your personal funds. There are plenty of banks that offer free checking. Make sure you have separate accounts and use your side hustle account for side hustle business. If you have to pay for expenses and don’t have enough in the business account, “loan” yourself money by transferring funds from your personal account into the business account.
- Keep Track! Not keeping track of what you make and spend on your side hustle is the number one way to get yourself into trouble! Your tracking system doesn’t have to be a full-fledged, feature-heavy accounting system. Just be sure to record your income and expenses. It can be as simple as an Excel Spreadsheet in the beginning, or a program like QuickBooks Self Employed or FreshBooks.
- Set aside a percentage for taxes. Yes, you need to report your side hustle earnings and pay taxes on those earnings. Setting aside 25-30% of what you make is a good starting point. You will most likely have expenses to deduct, so this should be more than enough. However, as everyone’s situation is different, consulting your tax preparer for a more accurate estimate is highly recommended.
- Talk to the professionals. If you have any questions about what you need to do to make sure your side hustle is on the up and up, reach out to the various professionals who can help. Attorneys, tax preparers and professional bookkeepers have a wealth of knowledge and can offer advice and guidance to keep you and your side hustle out of trouble. Their fees are well worth avoiding penalties, interest, and a host of other headaches.
Accounting & Bookkeeping Services in NH
If you need support with your side hustle’s accounting and bookkeeping, or are ready to take the leap from side hustle to full time entrepreneur, the experts at Fournier Accounting and Bookkeeping Services are here to help. We serve small businesses throughout New Hampshire and the U.S. Contact us today!