How to Properly Classify Your Income and Business Expenses in a Cozy Summer Wind-Down
As summer winds down, many people begin to shift their focus from side hustles and short-term gigs back to more routine schedules. Whether you picked up freelance work, drove for a rideshare app, sold on Etsy, or offered part-time services to make extra money this summer, one thing is certain: that income has tax consequences.
And with the rise of the gig economy, understanding how to properly classify your earnings and expenses is essential for staying in the clear with the IRS—and maximizing your tax benefits.
What Is “Gig Work”?
The IRS defines gig work as income earned from on-demand, freelance, or self-employed services, often done through platforms like:
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Uber, Lyft, DoorDash
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Etsy, eBay, Facebook Marketplace
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Fiverr, Upwork
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Airbnb
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Personal services (like pet sitting, tutoring, photography, or lawn care)
If you worked for yourself in any capacity this summer, you are considered self-employed—even if it was just part-time.
Step 1: Know How to Report Your Income
Gig income is taxable—even if you never received a 1099.
You must report:
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All cash, digital payments, and app-based income
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Tips received
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Any 1099-NEC or 1099-K you were issued
Failing to report this income can lead to penalties or audits down the road. Keep in mind: platforms like Venmo, PayPal, and Cash App are now required to report transactions over a certain threshold, so side income is more visible to the IRS than ever before.
Step 2: Track Your Business Expenses
Here’s the good news: as a gig worker, you may be able to deduct ordinary and necessary business expenses to reduce your taxable income.
Examples include:
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Mileage and vehicle costs (for delivery drivers or rideshare)
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Supplies and materials (for sellers or crafters)
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Phone bills or internet used for business
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Advertising or marketing costs
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Software or subscription fees
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Workspace or home office expenses
Accurate recordkeeping matters. Keep receipts, digital logs, and summaries of your business-related purchases. Good records can lead to significant tax savings.
Step 3: Pay Self-Employment Taxes
When you work for yourself, you’re responsible for both the employer and employee share of Social Security and Medicare taxes—this is known as the self-employment tax, and it’s typically 15.3% on your net earnings.
Depending on your income level, you may also be required to pay quarterly estimated taxes throughout the year to avoid underpayment penalties.
Step 4: Consider a Separate Business Bank Account
If you’re planning to continue your gig work beyond summer, now is a good time to open a separate bank account for your freelance income and expenses. This simplifies tracking and helps establish your work as a legitimate business in the eyes of the IRS.
Bottom Line
Even if your gig was just a summer project or a few weekend jobs, it’s important to understand how to treat that income properly when tax season arrives. With the right planning and categorization, you can avoid unpleasant surprises and possibly lower your overall tax burden.
If you’re unsure how to report your side income or which deductions apply to you, it’s best to talk to someone who knows the ins and outs of gig economy tax rules.
Summer may be wrapping up, but your tax planning doesn’t have to.
If you earned extra income this season, let us help you make sense of it—before it turns into a problem.
📞 Let’s talk taxes:
https://ilovedoingtaxes.net/schedule-now/
📱 Or call (678) 675-4268
