My Side Gigs and Taxes: I Owe the IRS!
The terror didn’t stem from the thousands of dollars I owed but from the fact that I hadn’t prepared for it — that I went through the year assuming the money I made from my freelance gigs didn’t need to be taxed, or that I had never even considered it.
Chicago — Throughout the US, several gig economy workers, freelancers and others tasked with filing 1099 forms this tax season let out a collective shriek as we prepared our returns for April 18 — or maybe I’m just projecting. When I found out how much I owed the Feds, a horrified look didn’t do justice to what I felt inside.
The terror didn’t stem from the thousands of dollars I owed but from the fact that I hadn’t prepared for it — that I went through the year assuming the money I made from my freelance gigs didn’t need to be taxed, or that I had never even considered it. Perhaps it’s one of those adult considerations that’s only ingrained in us 20-somethings after we’re hit hard by a tax bill. No wonder our parents would lecture us about tax season all year long with the same horrified look in their eyes.
I guess all I, and anyone else in situations like mine, can do now is accept the tax challenges we face, move forward and strategize for next year. Easier said than done. Student loan debt, rent, car payments and other financial pressures already tug at our attention. Some of us are the breadwinners in our families. We took on freelance opportunities because we had to — our full-time work wasn’t enough to keep our heads above water — because it was the only thing we could think of to navigate some other unexpected financial catastrophe.
Now, faced with a new challenge, a new kind of catastrophe, it can be tempting to feel like we won’t make it. To combat those thoughts, I’ve been trying to convince myself that isn’t true, even if I don’t always believe it. A part of that process has required me to try things I seldom did before.
For one, I listened to my parents. Turns out they’ve been in similar situations multiple times throughout their lives. They helped me weigh the pros and cons of payment plans the IRS offers, insights that helped me make the decision to pay the tax bill in full. I thought it was best to pay it all now instead of paying a monthly bill for the next few years due to the high interest rates that come with the plans.
Second, I listened to my wife. She and my parents reassured me that we could rebuild the savings we lost, if I made better budgeting choices. My wife and I are already making plans to set aside a portion of my freelance money each month to prepare for next year. It hurts to see that money sitting in my account but it beats being screwed.
Third, this experience has informed the way we track and audit our finances. We make sure to create a record of everything we spend on, which allows us to take a look at our finances from a birds-eye-view.
If there’s any advice I’d give, it's to prepare for tax season as early as possible. Like now. Go. Don’t wait.