In 2019, 25% of full-time employees said they were earning extra money* on the side which was an increase from 16% just two years prior. If you want to get on that train, here are a few tips to start.
There’s no specific administrative task for you to do if you just want to do a little extra work. Of course you could incorporate or register a DBA name with your state, you could go to a bank and open a business account with higher fees than your personal account. But you don’t have to. You can just find yourself some gigs and start working – the only thing you’re required to do is report the income (more on that below). Also note that for some specific professions (mostly in construction, healthcare and education) you’re required to register with the state and get specific insurance.
Join a marketplace
This is like pushing an open door, but if you’re looking for an easy/guaranteed way to make some extra cash, companies like Uber, Lyft, Doordash, Instacart are constantly looking for more workers, to work all sorts of shifts. If you have a specific skill set (and no non-compete clause!), you can also create a profile on gig-based platforms like Fiverr, Upwork, or Storyhunter, where companies are constantly looking for remote workers to execute small, specific projects. If you make things, Etsy, eBay and Amazon have a place for you to sell your products.
Understand the tax implications.
Starting a side gig will have an impact on how you report your taxes. When you work as a full-time employee, your federal and state taxes are taken out of your paycheck every month and you receive a simple W2 form at the end of the year, saying how much you were paid and how much tax you paid. Simple. That won’t be the case for the income coming from your side gig. You’ll need to pay self-employment taxes, and you will have to do it yourself. If that sounds like a headache, consider it a small one. Once you get the hang of it, it’s a pretty straightforward process (and we explain it all here.) Because here’s the reward for that small headache: when you start your side gig, you technically “open” a small business, meaning you can now categorize some of your purchases as business expenses and deduct them from your taxable income: you can’t ride for Lyft if you don’t have a smartphone and a data plan. So your cellphone bill and your new iPhone are now business expenses that you can deduct from your taxes, saving you money.
Take it slow
Building a freelancing business takes time, because it’s a lot about network and word of mouth. Do what you can at first. See what works. Offer competitive rates to start and slowly increase over time, with new clients. If this is a fun thing on the side, keep it fun, until you decide to take it to the next level. If you need it to pay the bills, try to find the most efficient way to make the extra cash while taking advantage of the tax reductions that can save you money when you’re self-employed.
Open a Lili account 😉
Remember Lili was designed for freelancers, so all this tax stuff, we’ve made it easier for you with a series of tools that helps you save and keep track of what you owe. And we offer early access (up to 2 days early) to your earnings from many of the majors marketplaces.
*Source: Upwork & Freelancer’s Union: “Freelancing in America 2019 Survey”