The gig economy has been steadily on the rise in recent years, which means there are many new entrants to that unique and challenging world. Being part of the gig economy can be rewarding, but the bookkeeping issues can sometimes feel overwhelming.
When you are persuading gig work on the side, hiring a bookkeeper may be out of the question. You do not want to spend all your profits just to run the numbers, but the good news is that you do not have to. DIY bookkeeping is entirely possible for gig workers, and here are some tips to make it happen.
1. Use a spreadsheet or similar tool for tracking income. You don’t need to spend money on fancy software when free spreadsheets are available. Gig workers can even find premade templates with all the categories in place. That makes it easy and free to accurately report income to the IRS and other taxing authorities.
2. Keep a close eye on expenses. Tracking income is essential, but it only tells half the story. Gig workers who fail to track expenses could end up paying taxes on money they did not get to keep. Gig workers need to keep a close watch on their expenses.
3. Scan receipts promptly and save them securely. Reporting expenses is important, but proving them could be even more critical. Gig workers, freelancers, and other independent contractors are often targeted for audits, so keeping receipts is vital. A receipt scanner can be a great investment in your business, but you can screenshot receipts and save them to the cloud in a pinch.
4. Set up a separate bank account for your gig economy business. Even if your gig work is just a side hustle, it is important to treat it as a business. Opening a separate bank account for business income will make expense tracking, income reporting, and tax payments much easier.
5. Set reminders for quarterly tax payments. One less-than-pleasant aspect of gig work is the tax burden that can come with it. Gig workers may be required to make quarterly payments to the IRS, and they do not want to miss those deadlines. Setting calendar reminders is a great way to ensure that nothing is missed.
6. Keep client contact information up to date. A single gig worker might have earnings from dozens of clients, making bookkeeping particularly complicated. That is why it is important to maintain an accurate list of clients, including their contact information.
7. Use a checklist to ensure all income is accurately reported. Armed with a list of clients and jobs, gig workers can check their records to ensure all income has been accurately reported. This is an important step since a mismatch between client-reported payments and gig worker-reported income could become an audit trigger.
8. Print hard copy reports from payment processors. When you are paid electronically, the payment processor should track how much you earned and send you a detailed accounting of your income. The operative word there is should, so gig workers should check their accounts and print reports on at least a quarterly basis.
9. Document your home office space. Gig workers who work from home may be able to claim their office space as a deduction, but there are strict rules for doing so. If you plan to take the home office deduction, take the time to measure, photograph, and otherwise document the space in question.
10. Scan and save all tax documents. Taxes can be complicated for gig workers, and it is important to maintain scrupulous records. That means scanning all tax forms, downloading copies of tax returns, and ensuring everything is secured and readily available. It never hurts to have multiple copies, so backups are an essential part of doing business.
Working in the gig economy can be great. You get to pursue your passions, grow your skills, meet new people, and, most importantly, make some extra money.
This article was originally shared via our education partner, BalancePro.
