Nearly one third of Americans are now earning extra money on the side. But when working as an independent, do you know that you are responsible for paying taxes?
If you don’t receive a W-2 from an employer, you must self-report any additional income to the IRS.
Failure to report earned income from any source is tax fraud. If you don’t report income on your jobs, and you are audited, you could incur a penalty equal to 0.5 percent of your unpaid taxes PLUS the back taxes and interest. In addition, you could be assessed a penalty equal to 20% of the underpayment if it is determined that you purposely underreported your income and tax liability.
Make sure to keep receipts for any expenses you might incur from your jobs. You may be able to minimize your tax bill by taking advantage of tax deductions.