To many, the gig economy offers a chance to hustle toward their American dreams. But navigating the financial side of being a gig worker can be tricky without some guidance. If you make over $400 in any given year as a self-employed person, you’ll have new tax burdens (and tax benefits) to navigate. So now, in the month of independence, Leadingham Rodgers is here to provide some basic financial advice for people hoping to thrive in the gig economy.
Do you sell floral arrangements on the side? Conduct estate sales for clients? Create digital assets for online companies? We’ll help you understand what kind of organization you’re starting and what financial preparations will work best for your brand of hustle.
Am I Part of the Gig Economy?
The fundamentals of gig work have existed for generations: it’s a form of self-employment that is flexible, often changing, and ultimately in your control. But the digital gig economy has changed the landscape forever, with an economic impact that is expected to hit $455 billion by 2023.
America’s self-employment rate is now 28.2%, which includes millions of freelancers, independent contractors, artists & craftspeople, delivery drivers, and so much more. So if you’re a sole proprietor, an independent contractor, or a freelancer, you’re a gig worker—whether you’re making money on the side or doing gig work full-time.
Financial Tips for Gig Workers & the Self-Employed
Investigate Your Insurance Options
The gig economy can offer a wide range of benefits to any individual or business entity. Unfortunately, it doesn’t come with the same capital-B benefits that full-time work typically does, so you’ll have to think carefully about health insurance and other protections.
Make sure you have suitable types of insurance to cover any potential gaps that could keep you from going into debt in the case of an accident. Start with health insurance, then think about liability insurance, disability insurance, and car insurance (especially if you drive a lot for your work!).
Keep Track of Your Expenses
The most successful side-hustlers are also the best bookkeepers. It’s important to keep careful track of the time you spend on projects, both for accurately billing your clients and discovering areas of improvement and growth. If you travel for work, you may be able to write off your gas and toll expenses on your tax return. Maintain a careful inventory of all legitimate business-related expenses, from printer ink and paper to health insurance to professional membership dues.
A Certified Public Accountant can help you discover legitimate deductions that can make a big difference on your tax bill, including exploring options like the home office deduction. There are a lot of ways to lower the amount you owe.
Budget Wisely and Often
One of the biggest challenges for those new to self-employment is remembering to set aside enough money from their paychecks to cover taxes. Because you won’t have anyone regularly deducting taxes from your paycheck, you’ll face a painful bill from the IRS in April if you haven’t been setting enough aside.
Remember—as a gig worker, you’re also responsible for paying the full amount of Social Security & Medicare taxes that a traditional employer would normally cover a portion of. That’s why we typically recommend setting aside 20-30% of your earnings to be safe.
File Quarterly Taxes
Paying your local, state, and federal taxes quarterly allows you to pay in smaller increments rather than all at once. Plus, if you expect to owe more than $1,000 and meet certain other requirements, the IRS may actually require to do so. Because there are additional rules on calculating and paying estimated taxes, we encourage independent contractors to seek advice from one of the expert accountants at Leadingham Rodgers!
Embrace the Freedom to Profit on Your Terms
From big-picture goals to your everyday financial challenges, a CPA can address all your unique needs to make sure you have everything under control. Our team will explore all of your deductions and filing options when it’s time to file, and we can provide expert consulting services to help you manage your money wisely throughout the year. That way, you can focus on getting more gigs and building your reputation.
No matter the good or service you’re providing to your customers, our team is equipped with the knowledge to help you be successful.
Leadingham Rodgers: Certified Public Accountants in Montgomery, AL
Whether you are working alone or starting a business entity, there are several issues to consider from a financial perspective. The sooner your finances are secured and stabilized, the sooner you can analyze the success of your endeavors and forecast your progress. Call Leadingham Rodgers Accountancy at 334-721-2548 or contact us online to secure and grow your finances!