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Peacock & French CPAs
Sep 01, 2025

So, you’ve got a side hustle. Maybe you’re freelancing after hours, running a weekend Airbnb, or finally turning that passion project into a little extra cash. Whatever your gig may be, one thing’s for sure: the IRS wants to hear about it.

So, you’ve got a side hustle. Maybe you’re freelancing after hours, running a weekend Airbnb, or finally turning that passion project into a little extra cash. Whatever your gig may be, one thing’s for sure: the IRS wants to hear about it.

Here’s the thing most people don’t realize until tax season hits — even your “just for fun” income is taxable. Whether you're pulling in $500 a month designing logos or $50,000 from a booming coaching business, it matters. And if you don’t treat it seriously now, it can seriously trip you up later.

Let’s break down what you need to know about taxes and your side income — no jargon, no panic, just real talk.

What Counts as Side Hustle or Freelance Income?

If money’s changing hands, and you’re not on someone’s payroll, chances are it qualifies as taxable income.

This includes:

• Freelance work (writing, web design, photography)
• Gig economy jobs (Uber, DoorDash, TaskRabbit)
• Selling products online (Etsy, Shopify, Facebook Marketplace)
• Coaching, consulting, tutoring
• Airbnb or other short-term rentals
• Even that “occasional” digital product you uploaded months ago

Whether it’s $20 here and there or several thousand per month, the IRS wants a slice — and it’s your job to report it.

Do You Really Have to Report It? (Yes, You Do.)

If you made more than $400 in self-employment income during the year, you’re required to report it. That’s right — even if it’s under the radar, even if no one sent you a 1099.

Now, if you do get a 1099-NEC or 1099-K, that’s the IRS’s way of saying, “We’re aware.” But even if you don’t receive any form, you’re still responsible for reporting all that income. Ignoring it doesn’t make it invisible — it just makes it audit-worthy.

Here Are the Tax Forms You’ll Probably Deal With

When you have freelance or gig income, your tax filing gets a little more complex. Here’s a rundown:

• Schedule C – Where you report profit or loss from your freelance or side hustle business
• Schedule SE – Used to calculate your self-employment tax
• Form 1099-NEC – You’ll get this from clients who paid you $600 or more
• Form 1099-K – Used for payments received via platforms like PayPal, Venmo, Stripe, or marketplaces
• Form 1040-ES – For calculating and paying quarterly estimated taxes

It sounds like a lot — and it can be — but it’s all manageable with the right system in place (and maybe a good CPA in your corner).

Let’s Talk Self-Employment Tax — Because It Sneaks Up on People

If you’ve only ever had a W-2 job, brace yourself. As a self-employed individual, you pay both the employer and employee share of Social Security and Medicare. That’s 15.3% right off the top — in addition to your regular income tax.

But don’t panic. This is where smart planning (and deductions) come into play.

Deductions You Should Absolutely Be Taking

Freelancers and side hustlers get access to a whole toolbox of write-offs. But only if you know what they are — and actually track them.

Here are some common ones:

• Home office expenses (yes, even if it’s just a dedicated corner)
• Equipment and software (your laptop, design tools, editing apps)
• Internet and phone (portion used for business)
• Mileage and vehicle use
• Marketing expenses
• Professional memberships or subscriptions
• Education and training related to your work

The golden rule: if it’s ordinary and necessary for your business, it’s probably deductible. Just keep receipts and good records.

What’s the Deal with Estimated Taxes?

Unlike a regular job, where taxes are withheld automatically, freelance income is all on you. That means paying your taxes quarterly — yes, every three months — using Form 1040-ES.

Here are the deadlines:

• April 15
• June 15
• September 15
• January 15 (of the following year)

Miss a deadline or underpay? The IRS may slap you with a penalty — even if you pay your full tax bill by April. The key is to estimate your income and set aside a portion (usually 25–30%) throughout the year.

Want to Stay Out of Trouble? Avoid These Mistakes.

Here are a few common pitfalls that can cause a major headache:

• Forgetting to report “small” income
• Ignoring quarterly taxes
• Mixing personal and business expenses
• Skipping out on recordkeeping
• Thinking your side hustle “isn’t a real business”

The IRS doesn’t care what you call it. If you’re earning, they’re watching.

Leveling Up: What to Do as Your Side Hustle Grows

If your freelance income starts to outpace your W-2 job, or if you’re thinking about going full-time, now’s the time to get serious about structure and strategy.

Consider:

• Forming an LLC or S-Corp to potentially reduce self-employment taxes
• Opening a business bank account
• Exploring retirement savings options like a SEP IRA or Solo 401(k)
• Hiring a tax professional to help you plan for long-term success

Pro tip: The sooner you treat your side hustle like a real business, the sooner it becomes one.

The IRS Isn’t the Enemy — But It Does Keep Score

Freelance and side hustle income can be a powerful way to increase your earnings, build wealth, and take control of your future. But it comes with responsibilities — and taxes are a big one.

Stay organized. Track everything. Don’t wait until April to sort it out.

And if you're not sure where to start? That’s where we comes in. We’ll help you navigate taxes on freelance income, optimize your deductions, and create a plan that keeps your side hustle profitable and compliant.

Contact us today, and let’s make tax season a little less stressful.