The New Year has come and gone, and now you’re left wondering how to account for that photography gig you took last year, or that child you tutor every other Saturday. Pepperlane is here to be your resource for getting your mother-owned business off the ground.
So, what is taxable? Bottom line is - you are required to report all income - even the $50 your best friend tossed you for making her daughter’s birthday cake. Generally, the IRS considers all income to be taxable income unless the law specifically provides an exemption.
So, how do you report it? If you are in business for yourself you’re considered self-employed. Self-employment income is reported on Form 1040, Schedule C. Don’t panic about filling out the form if this is your first time reporting your side hustle. If you’ve been holding onto your receipts you’ll be able to report both the income AND the expenses you made related to your business. Note: if your total profit after expenses is more than $400 for the year, you’ll also fill out Form 1040 Schedule SE.
What should I report? Don’t simply enter the amount you made from your customers and call it a day! If you held onto the receipts to back it up, you can reduce the amount of tax you owe by reporting business related expenses.
Just some examples of expenses you can report to reduce your tax burden:
- The cost of any supplies you used that relate to your business.
Examples: Personal chefs can claim any groceries they bought, home sewists can claim fabric and notions, calligraphers can claim pens and ink, etc.
- Equipment you bought and use primarily for your business.
Examples: work computer, cameras, office furniture, even your cell phone.
- Advertising. Did you run any Facebook ads campaigns, or pay to advertise yourself?
- Do you work primarily out of your home office? A part of your electricity, telephone, and internet services can be considered a business expense.
- Local transportation and travel to and from your client’s locations.
- Meals with clients or other business activities.
If you don’t want to figure it all out alone, a tax professional can help you find the deductions you qualify for (and you can even claim their fees as an expense). Sign up on Pepperlane to find a mother that can help and even more resources for your small business.