Author Topic: Set up a business for my side hustle?  (Read 393 times)

afuera

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Set up a business for my side hustle?
« on: October 24, 2018, 10:52:20 AM »
I currently have side hustle where I referee soccer games which I can earn a couple hundred bucks a week depending on how hard I want to work.  I typically make less than $10K/year since it is seasonal.  I have a business credit card (Chase INK) that I use for new gear or yearly certification classes. I haven't been tracking mileage or gas spent on this side hustle because one of the fields is within biking distance and the main other is <10 min away so the impact really isn't significant.  I have direct deposit set up through referee assignors for payment and get a 1099 from them every year.  My day job is high income and Hubs and I make ~200K combined before taxes so this isn't a huge impact from a tax perspective.

Is there any benefit to setting up a business for the income/expenses of my side hustle?  Where/how would I even get started on that and is there a type that would typically work best? I've been told I might be able to set up a SEPP IRA and tax shelter more money (currently maxing all tax-sheltered accounts) but I am not sure of the rules around that.  I'm starting to do research on my own but I know there has to be some smart people around here who have already figured out the best way to handle side hustles.   

aetheldrea

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Re: Set up a business for my side hustle?
« Reply #1 on: November 01, 2018, 03:21:23 PM »
Sounds like you already have a business as a self-employed independent contractor, there really isn't anything you need to set up to make it an "official business." In your case there isn't a real reason to set up an LLC or corporation, which would protect you personally from the misdeeds of your business partners. And no reason to publish a fictitious business name statement.
If you are getting 1099's then the IRS is as well, and they expect you to follow the tax laws and declare all of your income. This will be subject to self-employment tax (employee and employer social security and medicare). Tax time is about to get more complicated for you.
You should immediately start tracking all your mileage, no reason not to claim all the business deductions you are entitled to.
If you are not already maxing out a 401k at your main job, then a Solo 401k would allow you to contribute more then a SEP IRA. Otherwise, a SEP is super simple to set up, and you can contribute up to 20% of your self employment earnings (after expenses and 1/2 of self employment tax is deducted out.
The first year we set up a SEP for my wife, we contributed $1600 and our income tax bill went down $800, so effectively a $800 contribution with a 100% match from Uncle Sam.

afuera

  • Bristles
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  • Age: 27
  • Location: Houston, TX
Re: Set up a business for my side hustle?
« Reply #2 on: November 07, 2018, 08:28:06 AM »
Appreciate the response!   I think I will try and get a SEP IRA set up before the end of the year and put as much as I can into it.

aetheldrea

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Re: Set up a business for my side hustle?
« Reply #3 on: November 13, 2018, 04:48:10 PM »
Unlike a 401k, you have until the filing deadline to open and make contributions to a SEP. Sooner is usually better, though. Your tax software should calculate your maximum contribution for you.