The Sidehustle (S3E5)

Thursday, June 15th

00:25:42

Kris and Sheri are talking about reporting money on Side jobs or "Sidehustles". When are you required to report? Find out now. 

Transcription

Pop quiz what every bit as American as baseball apple pies to lose in the fourth of July the sod house. Her money is sponsored by Carol financial. Hi this is thinly matzo financial advisor with Carol signing into the ring match retirement can be currently confusing and public detours and stops. Whether you're simply getting started approaching retirement for far somewhere in the middle joining us very new series of workshops this spring we college retirement simple. For more information visit our website if Carol financials dot com. I don't know if it's true everywhere but I know in America there is nothing more American in the good old fashion side hustle. A little business running out of your garage or basement part time job you take on the side and there's so many options now even more than. I can remember my parents have been available to them for side hustles. Think being a lift driver raider being boomer driver I'm Sherry lynch I'm Chris Carroll and on this episode of her money to podcast. What's side hustle them what's the best way to operate one. Sweeping Christa you remember growing up you know your parents had friends who always had like a little some some time on the side. But Richards didn't have a lot of softer itself and actually I think that that's the business attitude to have today Carol credentials says it's was my dad's side toughest hole. It may be like an early age. So does it register as he wasn't making any money. Missouri could do is GoDaddy jokes we used to do other booed trunk of his car had just lowered my wife and I tried to wouldn't quite sad about that but yeah I mean these you know I think I think Americans do like this idea of having a hobby that pace. That's how I think your mother's side puzzles is having a hobby that pays but some people recitals lose. Very significant. And it beat columns there may hustle does click back from a long line of Avon ladies. Down. And I don't cool suit. I didn't understand why things were always fallen off the trucks closer struck out you know I still kept coming this idea of that. You do your job was for all of the necessities in life. And when then your side hustle maybe is how you got to the beach for weaken the summer. Yeah maybe you finally paid off to Sears credit card or whatever so let's talk about. Side hustles and and what he need to do to make something like that. Legit yeah. Well I mean number what the F to me you would do is pay taxes. How many people don't listen birdies but what are if you had to guess the ratio of people that are that are completely on the up and I'll put aside hustle. Maybe Helms may be less so I I don't. I would say in today's day and age it's probably more than half. Is harder to get away because it's harder to get away with it because you know you either you pointed to a couple. There were driver right dog walk her things like out most of that happens through companies now right and so the company legitimizes a major paycheck and then you have you pay taxes. The little different if you have a thriving. As chief business and all of its direct you know but if you're army day in her giving paid through PayPal most of the time. That track to charts are you doing so you you're more likely to see this as legitimate it's more likely to be legitimized. I guess as soon as it stops being like a strictly cash business. You have to get rigid about it yeah I think that's probably term. And there are so many cool things some there's a great website out there called custom made where. All of these artisans are in this web space and you can get someone to make Q your custom wedding band or coffee table or whatever right there to get its PayPal now so it's tracked. This is a great way for people to have a side hustle and to get a wider market for their side hustle. But I'm wondering I guess when when you're doing that. On are there ways that you can make that money work more effectively or protect yourself from. The tax consequences. Oral grow the business let's let's start with that I think the first. His PE need to deal we're of the tax consequences because the the way you futures softened trouble is. You know you'd Q do a lot of this work on the side and you don't withhold any taxes along the way and then the next year you know April 15 comes around. You saw that your tax form and try to do legitimately and realized. Well there's not a refund coming actually mean to write a check. To the government here's a question is thorough. On an amount of money like a threshold what you're allowed to two government looks the other way when you earn up to a certain point do you side hustle love and then you have to pay taxes when I was out or well. Okay soon and there's some gray areas here and I don't wanna be your QL lynch we're very cash. Some there's some gray areas here at a door would be your account and to bring you know if it's only. War one side hustle my B babysitting OK perfect example maybe if I babysit for a clean some of these houses or something like that. As long as that person pays you less than 15100 dollars in a year. Nobody. Who doesn't really they don't have to report it now guys and now Marshall poster reported yeah but you'd room. There once again about the better your. Daybreak and countries is not an encounter a lawyer this is just cumbersome opera says. At the disclosure judge is saying you know you do technically if you earn money for working you should be reporting it to the iris. But if it's a relatively small amount of money you know you helped somebody out cleaning out their house. I tired you know friends teenager to come over Naomi cleaning out X. You know. You know I pay him what erupt pay him a few dollars an hour and that dude takes a weekend you know and Becky doesn't necessarily report that yeah yeah having gotten so you know but I mean really you're supposed to be reporting everything you read that smooth you have blitzed moved whittled the law the letter of the law as you should be reporting your income. Regardless of the income are you gonna get coffer that small amount of money that Cheniere room we know. But because most likely the neighbors Marca reported because that's how that's how would have to happen right. But that is the answer to my question there is no legs and government threshold where he can make less than mess. And and not reports to charter shall Daschle's so what you're saying is is that it's all money in it all counts. But blood there's a point at which the person who he's shoot is required to report. What's so there there was a politician some years ago the god in all kinds of trouble for paying in any under the table that's what Iraq that's what we called this money that we don't. Talk about getting this cash flow under the table. And I remember kind of ended that career yes I had nowadays I think has its tax of jackets tax evasion it's against the law. So you do have to be careful yet if if you were the one. Teen someone for a side hustle if you pay someone more than 15100 dollars a year you reported. Now that's if you pay individual you know your car company not to report that because the company used the company's job to report their income right. But if I hire babysitters and I'm. I'll I'll admit that there's probably times where are being guilty of that if you used the same baby sitter ever never threw a person year. If during the course a year you paid the baby sitter 15100 dollars she's an employee. And based somewhat babysitters cost it doesn't take that many nights out to get up to 15100 dollars for the baby center got what if you haven't made that you pay under the table he had. Under the table well if you pay your Fiore yeah remaining fifteen or shear your special report that she's certainly glee glee that's. You know that's the threshold if you weren't paying. So at what point does a side hustle on. Become something that you need to be smarter about financially and maybe decide okay this site also this at T business some selling hearings or. I'm repairing lawn mowers are never. This is this pretty unanimous social change maybe I should incorporate. Yeah or PS sole proprietor wherever the heck that means he's seen it sometimes a business cards are being LLC whatever that means. Colonel what are those things such and when should you be those things that's. So if you're. Ringing and if you bringing in enough money that someone true raking of transactions and bringing in enough money that someone could. Somehow assume you. You you need some kind of protection from noon from lawsuit preparing now. Who if you're an FC in your computer. Selling bracelets for two dollars a piece where you really in its suit probably not but if you sell enough problem in their short term copying paid. You know you're you're probably still worn out to claim that income brain prey world. If you're sole proprietor. That means it's basically just a business that is all under pursuing you. Okay there's a separate taxes to file or anything like that which is sheer. Now you can be Yunel seat limited liability corporation and be a sole proprietor so limited liability corporation just sets up a basically a level of protection. Between you and your business. Okay and what that assesses you can't sue me for something my business. Did. Oh so you bought my earrings on at C and then you choked on them. As a sole proprietor you can bankrupt my family and take to house from the dog. But up from an LLC can only bankrupt my little exe business and you can't have my dog theory is that basically. How to write together it's Kara good to dole. Don't separate the soul for prior from the LCC companion you can be done you can be an LC and then you're the only person in the LC than your sole proprietor Ghiaciuc. When you when you moved past that there's there's basically types of what are called partnerships or corporations okay. So corporation. You have to be incorporated you file that with the state and it's fairly inexpensive you can do all this online are you Foreman LC arm on him like a few hours I mean it's so easy you know. The one things you have to wait for. Does it. If you filed with the statement to get back from the state yes it's official and then you get like attacks number and I sort of sat. Now what is difference between an LLC which she just said is a limb got it liability corporation and the corporation. And there there's an outside say you heard it well there's there's basically there's a couple of types of corporations and there's what's called a C corporation in the is what's called an S corporation I've heard of these things but I know I do if they need he's basically a C corporation pays taxes as a corporation separately from this corporation all the taxes flow through to the individual now. Why would any of that matter on your side hustle OK if you should issue its assault partnership there are few in your hard hammer. As a side hustle. Start cleaning house of us we'll see you B star little on the side view and another person decide to clean houses or do you join my. Mobile dog grooming business rank. Now I've got multiple people who know that may be have ownership in due to corporation. Then I might need to look at. Should I should I be a corporation which should be corporation pork or can be a partnership either way there's legal documentation that he speaks got you know what point do you do this. I would say if if you businesses big enough that you need a partner who run it actor already got the point that you probably need to do something. OPEC but this is all pretty it's pretty inexpensive and fast online now it really is a way you know you don't need to go hard expense of returning to make an LLC free. In previous episodes we've talked about. The white seems to cost so much to be an entrepreneur mark and like for example one of the things I learned to come. Is that the reason that self employed people health insurance costs more 'cause you don't have the company kicking in any shares I you're caring the whole burden right and and so. Com I guess my question is is. No when you decide to be calm and now let's go with an LLC move feared anti business or your dog grooming. It are there tax advantages in financial advantages to doing that or is it all just about pre. Actions it's more about protection okay so. You know ultimately if you were now all see big do you own all the shares that's assault for partnerships or you have this limited liability corporation but you own all the shares. And that's sold for a are shipped all the income from the corporation just goes on your normal taxes anyway. Now might be counted as self employment income brain if paying business that self employment income right at that point. So as we've talked about before self important comment that there are higher taxes or self employment tax. That's nothing to hide from you know it just is what it is nobody likes paying him but you but it is what it is the when you get to a partnership. Or what's called an S corporation. Let's say you and I are 5050 on my mobile dog grooming cranks OK so last year the mobile dog grooming business makes 40000 dollars. That's 101000 dollars for each of us right. The corporation. Doesn't file taxes we just each had 101000 dollars to our taxes. OK so the corporation is not because you know you cheer like tossed around and in the news media all the time you corporations are people. So the corporation in our mobile dog grooming business it's just you and me and we're reach. Responsible for our. You have no and that's what happens and a partnership Vernon what's called an S corporation OK okay. It doesn't work for big corporations and only works for small corporations but most people side also it's going to be a small corporation OK okay and you don't really want to be I'm a major corporation. Right do well maybe that's the Tony your goal precise console but it's certainly not but not today have lunch today you know so so really the taxes are just gonna pass through your taxes just like they would before if you had just been. Selling on Etsy you're doing the dog grooming him and I am actually filled up the taxes cigarette or. So the difference is the protection or so. And that's really that's really the bottom line that that filing that and going official with the site council that's to protect you and I'm guessing that depending on what your hustle list. You have differing needs. Extra protection that's exactly right solution if you're selling this to dollar bracelets on at CD you really need and well see I'm not sure what is some of the USC four. But how about on taking care of UT or Alter what is on to hear your two year old that's tyranny and your power or hear how are whenever Jorge dog grooming if I hurt if I heard your very expensive. Moved below or yeah whatever you know like yeah. There there's risks they're right there are my kid sued by somebody. Hope doesn't that provides you some personal protection. Are there any ways to take the income from your side hustle. Let's say that you know you are doing something where you go aren't I'm listening to this and this is good to know I don't think I really need a lot of protection. Make him a fair amount of money here on the civil side gig. What Chile do without money to maximize it. Whom I mean is it all just linked you know income income income is there anything is there any way to save Nader ambassador parking or do anything cool. Once your side hustle is big enough. There are some advantages to incorporating. OK no no beginning to still be a sole proprietor show epic so all flew through your taxes. But if you have a little c.s set up than you might be able to. Invest some of that money in a taxi fares Schwartz so you do you can set up what's called a sep IRA self employed to. IRA has essentially. So that's a way to save for your retirement without money can you get attacks and managed to love. If if your subtle sort of figure there are some other options to assume you'd. Win now I would never do this must quesada also may be. Probably around 101000 dollars a year would probably be around my number no I'm not saying it would be. Useless. Five or 6000 dollars a year but it big it's it's a fair amount of trouble. But if your side Russell's got to be something like 101000 dollars a year its worst surcharge. Well Chris I know a number of people. Who had exe businesses and sightings cone where they are making 101000 dollars memorial absolutely not I make sure drug drop you go well I'm sorry. How much did you say you dismayed making bracelets out every single guy Bershard. Do you do you see it because the Internet has changed the game. Terms of being able to get your product out there and market it yeah because it might only be one and a million people that want your weird little thing but if you can do on the Internet in front of billions of its hole all the. And I would even think about EPA if you are people who spend their weekends trolling yard sales and making bank down the road on eBay it's out there but I was amazing how many of those people are. So I think there are a lot more people out there and that ten K and upside gossip club. I agree then and once you hit that's the number where I think it makes sense to sit down and talk to somebody and think about it. OK so what you wanna do I would tell you the you don't have a conversation. With you're an account first. Accountants are usually really understanding of these things and you sit down you say look I'm making about this amount of money. Can I do some kind of retirement savings. When you're gonna have to be set up dismal scene or doing your should be paying taxes on him or do it but there are some ways sued to investor tax advantaged way. Without side house ammonium particularly I think it's great it's it's great if you wanna use some of that money saved for retirement. Tommy first calls for much to do that. Which. We've got this paycheck coming in it's paying for you know food clothing shelter them. And we're receiving a little bit here and there for college and all but but there's no way we're gonna get where we need to be. Financially so then here comes the side hustle. Decide hustle can be either way to fuel some of that and accelerate some of that in addition to paying for maybe some of those around. Trips or whatever you write some of the fun stuff and so. He needs to cheer about people iMac it's almost like urban legend because I swear I don't actually know anybody where they have to side hustle. And Darryl writing every chain and its brother off. On their taxes who. It is actually happening or is that just like hey I know guide it just bought a convertible and wrote it off as a business vehicle it doesn't. Really happy and well he used to. Much more so than a dozen now. He's the IRS is cracked down at all so twenty years ago people used to get away with some pretty silly stuff. But when churn incorporated or you don't have this legitimate business. You have business expenses. Rained so move. If you have to buy a truck because your side council is that we're mobile dog rumors and our group mercy yeah well that's a business expense. Now I don't. Actually get to write off a 100% of use if I sometimes use it for might be you know to take all the kids to soccer practice very. Got it there's actually forms I'm supposed to fill out that say like juices. How much I use it for my business now if you dedicate a portion of your home to a home office two were on the side business. You can basically deduct a lot of that suit pursuant a lot of cases legitimizing. The business. Might make sense because you mind me less than you really think when you add in all those expenses right so. Let's say I'm running this mobile garnering business or first you know I just I just I'm doing here for a few friends yeah I mean you're making a little extra money and at some point it becomes something I do every single weekend. I got I've got another person two of those shoes do it every single weekend I'm making 15161000. Dollars years coming in revenues. I Dubai used trucks just to do it. Well now. I don't really wanna pay taxes on the whole fifteen or 161000 dollars that I bring end but. I didn't really make all that because I have expenses right and so they're liking you and insert writing some things off come assessment on Champloo. Processed and on leashes rape trauma system on the battle truck. You know and so I get to write off these expenses as expenses for Marseille also right and that makes sense okay suit. So there's there's there's a level that which yes you can write off some things but. You not want you car writing off things that you should get a better shady. Now again twenty years ago the IRS and the IRS is very rarely ever catches people for the stuff. But twenty years ago they didn't have very good rules in place. Now they do now it's like who will did you follow this format for years and yes how much used for this. I used to hear in and I actually -- my car through the company because I do use my car for business travel laden or drunk driver around a lot of places. So. You know twenty years ago. People just leased every car through there through their company if you had a company is so important you'd just be like oh least MacArthur and have you know all that payments tax deductible because it's it's an expense rate that's not an easy to do it's really not you know nowadays are you fill out the right forms are you checking the mileage how much miles did you actually use more more people now have to use an app that says tracked. The actual miles use for work. First is tomorrow she used to different term personal chef. So it's interesting because at that moment in time when. Decide hustle has never in some ways being easier to kind of pull together in terms of marketing getting your side gig out there. The rules. Are also enjoying that same greater ease in finding you. That's sure it's a lot easier to find you know an instant and you know I think it's completely glued legitimate because these are the IRS. The IRS crackdown on it because of what use was happening right. He'd either be it via believe the government catches up with what's going on and then. In business so if businesses are writing things often shouldn't write off. There are search a pinch. So let the bottom line is congratulations. On your thriving anti business. Bad news you'll be writing off their vacation impairs Seattle that's you know there are some side councils will say this. Where there are really cool legitimate things you can fly it right off. Wolf I will point out one and if somebody wants to do this the bureau had. All curse. Off voters can write off virtually anything. I want published author and I could give ratings don't follow re search for your next book I mean did I beer at a Paris I mean to be prepared as he usually search trip for a at all. Milo if you. Also if there's still a lot of leeway you know we'll tell you that I think you're you're you're probably playing in in with fire if you never actually publish everything but if you're a published author. You can make a legitimate case for needing. To do a lot of things I just got a rainstorm for an awesome books set in the town South Pacific. A huge risk care else you would call it two weeks in Fiji. This song I don't hustle things suddenly looks amazing kid does this episode of her mining go earn the extra bucks. But make sure you followed the rules on Sherry lynch and Chris Carroll. Hey if you want more information about what we talked on today's show weren't you just have other questions about money. Is our website it's WWW Doug Carol financial dot com. Or you can only should mean email whether it's through the podcast or through my website I'd be happy to help if I can't. Her money is sponsored by Carol financial practices in doing that's so financial advisor with Jerrold I need something. The red not to retirement can be curvy confusing and public detours and stops but they are simply getting started approaching retirement for farm somewhere in the medal joining us very new series of workshops this spring we college retirement. Simple for more information visit our website at Cheryl financial dot com Charlie by guesses as to find me Sherry lynch and Chris Carol our executive producers are. New Treo broad Jonathan moving and Carol compete our producer is Heather affirmed our technical directors TJ Barnes and our editors Billy black special thanks to Emily Nestle and Mary Ann Edwards for information from this episode order lose and other episodes and subscribe to this podcast. Visit her money podcast dot com Herman I guess is now once Twitter follow us tweet us at her money podcasts. Email us your questions are questions asked her money podcast dot com. He can even use your phone's voice memo out to record your questioning email it to us. Questions at her money podcasts are confident we might even played on the show there already broadcast is a production of Entercom Charlotte and Carol financial. Securities offered through such tearing advisor networks LOC member finreg SIPC advisory services offered through kill financial associates HA registered investment advisor Carol financial it's a teary advisor networks are not affiliated.