Side Hustle Income and the IRS – What Gig Workers Need To Know Before Tax Season

Woman holding money while working on a laptop at a desk

Maybe you have enough room to squeeze a side hustle into your work schedule. But do you have room for that tax bill?

You can easily earn money from driving for an app or doing freelance work. If you spend all that income as you receive it, you could be surprised come tax season.

It’s important to know this because, according to a recent survey of 1,000 U.S. adults who had side hustles in 2026, 53% of respondents said they would struggle to cover essential expenses without their side hustle income.

Table of Contents

Your Side Hustle Income Will Count Towards Your Taxes
When Should You Get An IRS Bank Levy Release?
How To Read Your 1099s Correctly
Deducting Expenses From Your Profit
Start Saving For Taxes As You Earn
Simplify Tax Season
Final Note

Your Side Hustle Income Will Count Towards Your Taxes

All taxable income will need to be reported on your federal tax return. This can include your side hustle.

If you are a self-employed sole proprietor, you will take your income and subtract your business expenses. Your profit will usually be reported on a Schedule C. If your net earnings from self-employment are $400 or more, you generally must file a tax return and calculate self-employment tax. Even if it’s only a part-time job.

Self-employment taxes go towards Social Security and Medicare. It is in addition to your income tax. So your side hustle can increase your tax bill even if you have withholdings from your normal job.

Cash jobs and payments received directly from customers also need to be reported. Just because you didn’t receive a tax form doesn’t mean it isn’t taxable.

You can have a side hustle and still owe taxes. Be sure to record all of your payments, including tips and cash you may receive.

When Should You Get An IRS Bank Levy Release?

Not having enough money to pay a tax bill is never fun. Not responding to IRS collection can get you into more trouble.

If you owe back taxes, you may be subject to penalties, interest, and collections. Once the IRS sends proper notices, it can place a levy on your bank account. When the bank receives the notice, it can seize money from your account.

You have a limited time to act if you believe there was an error or would like to request an IRS bank levy release. Banks normally hold levied funds for 21 days before sending them to the IRS, subject to applicable exceptions. If your bank levy is creating a current economic hardship, you may qualify for a release. Keep in mind a release does not erase your tax debt.

If the levy is preventing you from living day to day, be prepared to show your financials and documentation. You will need to request the IRS bank levy release.

If you are a Michigan resident who has a side hustle and are being contacted by the IRS about a collection or have had a levy placed on your account, contact a Grand Rapids Tax Attorney. They can help you understand your options.

You should also try to clear any balance you owe before it goes to collections. File your return even if you cannot pay in full, and explore the IRS payment arrangements you may qualify for.

How To Read Your 1099s Correctly

A 1099-NEC will typically be issued when you have provided services as a non-employee. There was a change in 2026 that raised the reporting amount from $600 to $2,000 for payments made in 2026. Do not think that you can ignore this income if it is under the threshold.

Form 1099-K reports certain card and platform payments. For third-party payment networks, filing is generally required only when goods-and-services payments exceed $20,000 and 200 transactions; payment-card processing follows different rules.

For payments made through a third-party network, you will receive a 1099-K if you exceeded $20,000 and 200 transactions for goods or services. You may receive a 1099-K below these thresholds as well. There are different rules if you are accepting payments directly with a card processor.

Do not simply add all of your 1099 amounts and think that is your total income. You may have payments reported twice on different 1099 forms. A Form 1099-K shows gross payment amounts, not your taxable business profit.

You could receive a 1099-K from your platform, and the payment could show on your statement. Look at your dates to see if you missed any payments.

Be sure to look at your 1099s with your invoices, statements, refunds, and bank information. If a friend repays you for a shared meal or household bill through a payment app, that reimbursement is not taxable business income.

If you are selling items online, make sure you have documentation of your purchases. If you sell an item that you owned for personal use at a loss, you will not owe taxes on the sale. If you are buying and selling to make a profit, it is different. You may have an item on your 1099-K that you sold for personal use; refer to the instructions on how to report this.

Deducting Expenses From Your Profit

You may be making good money from your side hustle but end up spending more than you thought you would. The IRS allows you to deduct business expenses that are ordinary and necessary for your business.

Some examples of expenses that you can deduct are:

Supplies, app and processing fees
Portion of your cell phone/internet bill that is used for your business
Miles driven or vehicle expenses that were driven for business purposes (must have documentation)
Software and equipment that you use for your business

Just because you have an expense and you own a side hustle doesn’t mean you can deduct the entire amount. If you have a cell phone and your customers call you, you may not be able to deduct your full cell phone bill.

Make sure you keep receipts for your purchases and write down why you bought the item for your business. It will save you time trying to find all of your texts later on.

If you drive for your business, record the date, miles, and reason for the trip. The IRS updated its mileage rate during 2026, so make sure you know what date you are using. You cannot take the standard mileage rate and actual car expenses on the same car for the miles you drove.

Start Saving For Taxes As You Earn

Most independent contractors do not have federal income tax automatically withheld from gig payments. You may need to start making estimated tax payments during the year.

You may owe estimated tax if you expect to owe at least $1,000 after withholdings and credits are applied, with some exceptions by the IRS. You can also increase your withholding from your paycheck if you have a normal job as well. If you do not pay estimated taxes when you are required to, you could owe a penalty when you file your return.

Here are some tips to help you:

Keep your side hustle money separated from your regular income.
Save a portion of your side hustle checks for taxes.
Evaluate your income, expenses, and taxes each month.
Change your estimated tax payment or withholding if needed.

There is no magic number that you should save for taxes. It will depend on your profit, income, withholdings, and filing status. Talk to a tax professional about how much you should save for taxes.

You may also be able to take the qualified tips deduction if your occupation and income qualify for this. Qualified tips still have to be reported, and tips earned through self-employment generally remain subject to self-employment tax.

Don’t forget about state taxes either! If you live in Michigan, learn about your state tax requirements.

Simplify Tax Season

You don’t need a fancy accounting program; you just need to keep track of your income and expenses.

Make sure you have your 1099s, invoices, statements, receipts, miles, and estimated tax payment information before filing your 2026 tax return in 2027. Add up your numbers and make sure they match; don’t rely on your platform’s year-end number to be accurate.

If you have a W2 and freelance income, add your W2 to your calculations.

Always double-check your numbers before you file. It’s better to catch errors before filing than to wait for the IRS to contact you.

Final Note

Your side hustle income should help you, not hurt you when tax season rolls around. Make sure to report your income, document your expenses, and start saving for taxes as you earn.

If you owe back taxes, respond to the IRS and learn your options for resolving your balance.

This post may contain affiliate links.

More Recommended Ebike/Scooters

Check out these other ebikes and scooters I've reviewed:

Urban Arrow Ebike – Last year, I made one of the largest purchases I’ve ever made – I bought a $9,000 electric cargo bike from Urban Arrow. In my Urban Arrow review, I will discuss what it is and why I decided to buy this bike, as well as discuss how impactful a bike like this can be on your journey to financial independence.
Troxus Explorer Step-Thru Ebike – The Troxus Explorer Step-Thru is a fat-tire ebike that I’ve had the pleasure of riding for a while now. It has amazing power, great looks, and awesome range. If you’re looking for a great fat-tire ebike that offers a lot for the price, the Troxus Explorer Step-Thru is definitely one for you to consider. Check out my Troxus Explorer Step-Thru Review.
Hovsco HovBeta Ebike – The HovBeta is a folding ebike with great specs and a lot of interesting features, and importantly, it’s sold at a good price point. I’ve had a blast commuting with it and using it to do deliveries with DoorDash, Uber Eats, and Grubhub. Check out my Hovsco HovBeta Ebike Review.
Vanpowers Manidae Ebike – The Vanpowers Manidae is a fat tire ebike that I’ve been riding as my primary winter commuting bike and have also been using it to do food delivery with apps like DoorDash, Uber Eats, and Grubhub. After clocking in a decent number of miles with this ebike, I wanted to write a post sharing what my experience with the Vanpowers Manidae ebike has been like. Check out my Vanpowers Manidae Review.
Sohamo S3 Step-Thru Folding EBike Review – A Great Value Folding Ebike – The Sohamo S3 Step-Thru Folding Ebike is an entry-level folding ebike that offers a lot of value for the price point. I’ve been riding the Sohamo S3 for a while now, putting the bike through its paces, and I have to say, this bike has exceeded all of my expectations. Check out my Sohamo Review.
KBO Flip Ebike – The KBO Flip is an excellent bike. I’ve had a great time riding it and think it’s a versatile bike that can be used for a lot of purposes and can fit a variety of lifestyles. It’s worked out great for me as a general commuter bike and as a food delivery bike. Check out my KBO Flip Review.
Hiboy P7 Commuter Ebike – The Hiboy P7 is an excellent electric commuter bike that’s offered at an affordable price point. The range and speed of this bike are both very good, so you won’t have any trouble getting anywhere you need to go with it. As a food delivery vehicle, this is also good – with how much range it offers, you’ll be able to work all day on a single charge. Check out my Hiboy P7 Commuter Electric Bike Review.
Himiway Escape Ebike – The Himiway Escape is an interesting bike for anyone looking for a moped-style ebike. If you’re a gig economy worker, the Himiway Escape is particularly interesting and it’s possible to think of it as an investment, especially if you can opt to do deliveries with the Himiway versus using a car. It’s not cheap, but you can definitely make your money back when you compare the mileage you’ll put on your car versus using an ebike. Check out my Himiway Escape Bike Review.
Espin Sport Ebike – The Espin Sport is a good ebike for someone who is looking for an ebike that feels and rides more like a regular bike. There are many ebikes that are really only bikes in name. In reality, they’re basically electric mopeds. The Espin Sport, by contrast, is a bike you could probably ride without the battery and you’d feel like you’re just riding a regular bike. Check out my Espin Sport Review.
Varla Eagle One Scooter – The Varla Eagle One is an excellent scooter that can make sense for a lot of people. It can work as a primary mode of transportation. You can use it to work on gig economy apps like DoorDash, Uber Eats, and Grubhub. And it can also be a recreational vehicle if you’d prefer to use it for that. Check out my Varla Eagle One Review.
Varla Falcon Scooter – The Varla Falcon is an excellent scooter that offers a good amount of power at a lower price point compared to more powerful scooters. It’s not exactly an entry-level scooter, nor is it a high-powered scooter. I think it fits somewhere in-between those two categories – an intermediate scooter if I had to give it a category. Check out my Varla Falcon Review.
Hiboy S2 Scooter – The Hiboy S2 is an excellent entry-level commuter scooter that's perfect for someone looking to save some money in transportation costs and improve their commute. Check out my Hiboy S2 Review.
Hiboy S2R Scooter – The Hiboy S2R is one of the more interesting electric scooters I’ve been able to test out. It’s not a high-powered scooter, but for an everyday transport option, it’s very useful, especially given some of the unique features that it has. Indeed, for the price, the Hiboy S2R might be the best value scooter I’ve used. Check out my Hiboy S2R Review.
Fucare H3 Scooter – The Fucare H3 is a fun scooter and I’ve enjoyed testing it out. For a daily commuter or quick trips or errands, the Fucare H3 is probably the scooter I’ll use. It’s portable and easy to maneuver, so it’s just easier to take on the road when I need it. Check out my Fucare H3 Scooter Review.

More Recommended Investing App Bonuses

For additional investing app bonuses, be sure to check out the ones below:

M1 Finance ($75) – This is a great robo-advisor that has no fees and allows you to create a customized portfolio based on your risk tolerance. You also get $75 for opening an account. Check out my M1 Finance Referral Bonus – Step-By-Step Guide.
SoFi Invest ($25) – SoFi Invest is an easy brokerage account bonus that you can earn with just a few minutes of work. Use my SoFi Invest referral link, fund your SoFi Invest brokerage account with just $10 and you’ll get $25 of free stock. I also have a step-by-step guide for the SoFi Invest referral bonus.
Robinhood (1 free stock) – Robinhood gives you a free stock valued between $2.50-$225 if you open an account using my referral link.
Public (1 free stock) - Public gives you a free stock valued between $3-$70 if you open an account using my referral link.

More Recommended Bank Account Bonuses

If you’re looking for more easy bank bonuses, check out the below options. These bonuses are all easy to earn and have no fees or minimum balance requirements to worry about.

Ally Bank ($100) – Of all the banks out there, Ally is, without a doubt, my favorite. At the moment, Ally is offering $100 to customers who open an eligible Ally account and meet the requirements. Here are the step-by-step directions to earn your Ally Bank referral bonus.
Chime ($100) - Chime is a free bank account that offers a referral bonus if you use a referral link and complete a direct deposit of $200 or more. In practice, any ACH transfer into this account triggers the bonus. This bonus is easy to earn and posts instantly, so you’ll know if you met the requirements as soon as you move money into the account. I wrote a step-by-step guide on how to earn your Chime referral bonus that I recommend you check out.
US Bank Business ($400/$1200) – This is a fairly easy bank bonus to earn, since there are no direct deposit requirements. In addition, you can open the Silver Business Checking account, which comes with no monthly fees. Check out how to earn this big bonus here.
Current ($50) – Current is a free fintech bank that’s offering new users a $50 referral bonus after signing up for an account using a referral link. Current is an easy bonus to earn and also gives you access to three savings accounts that pay you 4% interest on up to $2,000. That means you can put away up to $6,000 earning 4% interest. That’s very good and makes Current an account I recommend to everyone. Check out my step-by-step guide on how to earn your Current Bank bonus.
Novo Bank ($40) - Novo bank is a free business checking account that’s currently offering a $40 bonus if you open a Novo business checking account using a referral link. In addition to being a good bank bonus, Novo is also a good business checking account. It has no monthly fees or minimum balance requirements and operates a good app and website. Indeed, it’s the business checking account I currently use for this blog. Check out my post on how to easily open a Novo account.
Varo ($25) – Varo is a free fintech banking app similar to Chime or Current. It’s currently offering a $25 bonus to new users that open a new Varo account with a referral link. The bonus for this bank is very easy to meet, all you need to do is spend $20 within 30 days of opening your Varo account. Check out my step-by-step guide to learn how to earn this bonus.

Kevin is an attorney and the blogger behind Financial Panther, a blog about personal finance, travel hacking, and side hustling using the gig economy. He paid off $87,000 worth of student loans in just 2.5 years by choosing not to live like a big shot lawyer.

Kevin is passionate about earning money using the gig economy and you can see all the ways he makes extra income every month in his side hustle reports.

Kevin is also big on using the latest fintech apps to improve his finances. Some of Kevin's favorite fintech apps include:

SoFi Money. A really good checking account with absolutely no fees. You'll get a $25 referral bonus if you open a SoFi Money account with a referral link, and an additional $300 if you complete a direct deposit.
5% Savings Accounts. I'm currently getting 5.24% interest on my savings through a company called Raisin. Opening a Raisin account takes minutes to complete, it's free, and all of your funds are FDIC-insured. I explain how it works, why I'm now using it to store my emergency fund and any other cash savings I have, and why I recommend everyone check it out in this review.
US Bank Business. US Bank is currently offering new business customers a $400/$1200 signup bonus after opening a new account and meeting certain requirements.
M1 Finance. This is a great robo-advisor that has no fees and allows you to create a customized portfolio based on your risk tolerance. You also get $75 for opening an account.
Empower. One of best free apps you can use to monitor your portfolio and track your net worth. This is one of the apps I use to track my financial accounts.

Feel free to send Kevin a message here.