From Side Hustle to Success: Tax Secrets for Savvy Women
Who doesn’t dream of turning their side hustle into a profitable, thriving business? It sounds like a dream come true until you start to think about all the implications. What about taxes? What if you make a mistake on your tax return and mess it all up?
A surprising number of women entrepreneurs subconsciously hold themselves back from being successful because they’re scared . . . of taxes. But don’t worry, today we’ll slay those dragons and show you just how to stay on the right side of the IRS, no matter how fast your business grows.
Your Business, Your Choice
Side hustles are just that; they are a fun hobby on the side for the most part. Once you start building it as a business, you need to pick the right business structure. This affects how you grow and what your tax benefits will look like. Let’s take a closer look at what your options are.
Sole Proprietorship: If you plan to keep this a one-person business, sole proprietorship is a good choice. You’ll report your business income on your personal tax return, but you’ll also be personally liable for any debts or lawsuits.
Limited Liability Company (LLC): This option gives you some personal liability protection and keeps your taxes flexible. You don’t pay corporate taxes since the profits from your LLC can pass through your personal return. However, you’ll need to file more paperwork depending on your state and may pay an annual fee.
S Corporation (S-Corp): If you want to scale your business, this can be a better option. You’ll pay yourself a salary, which reduces self-employment taxes, but you’ll need to follow stricter requirements.
Not sure which option is best? Talk to your tax expert to get personalized advice for your situation.
Keep Your Nose Clean (and Business Separate)
Nothing is more nerve-wracking than getting to tax season and realizing you have no idea what you spent or earned with your business. Not only is it messy and confusing, it can be really bad for your business!
As soon as you start your business (or right now if you’re past that), open a separate business bank account. This keeps your finances separated and it will be infinitely easier to plan your future and file your taxes.
Track everything! It’s easy enough to use a basic spreadsheet or financial tracking software to track what your income and expenses are. Trust me, this will become invaluable when tax season rolls around.
What Do You Owe?
Take the time to learn about what you can and cannot deduct for your side hustle. You can save a lot of money come tax time with careful planning. As you make purchases for your business, put those receipts in a safe place where you can find them again!
It’s also a good idea to familiarize yourself with what you’ll need to pay as an entrepreneur, including things like Social Security and Medicare. Self-employed people also need to make estimated quarterly tax payments if they expect to pay over $1,000 in taxes annually . . . so stay on top of things!
Simplify things with an expert opinion if you’re ready to take your side hustle to success. Contact Ask Anna Tax to learn more about what to expect as you grow your business.
