More Americans than ever before – an estimated one in four – are taking so-called “side gigs” to bring in extra money. Whether it is walking dogs on the weekends, renting out your home occasionally through Air BNB or another similar service, delivering, or hauling passengers with a ride-share service like Lyft or Uber, “side hustles” generate hundreds of billions of income annually.
Unfortunately, many of us, in particular those of the “Millennial” generation, aren’t declaring those extra earnings to the IRS or other taxing agencies. Almost a third of Millennials with side jobs, income-generating hobbies and occasional money-generating activities are not reporting their income.
The oversight is innocent in many cases. Sometimes people assume that low-level earnings aren’t taxable. Others’ motives might not be quite so pure; they think that if they’re paid primarily in cash, the IRS won’t find out and they can save themselves some money in taxes.
Financial website Finder.com reports that the average side-job earnings are just over $3,000 annually. Interestingly, though, taxpayers primarily choose to not declare that income. An estimated $214 billion in income from side gigs goes both unreported and non-taxed.
Beware the wrath of the IRS
Failing to declare income is risky. Not only is it illegal, it comes with serious penalties, interest and fines. The IRS shows dogged determination in tracking down tax evaders. Like the Mounties, the IRS “always gets its man.”
Even if your failure to report is based on an innocent mistake, you are still liable for the payment of back taxes due, and will face penalties, interest. Criminal tax evasion or fraud charges are even possible in egregious cases. If you are unsure about whether to declare your side income, consult an experienced tax attorney. When in doubt, err on the side of caution; it’s better to declare it and not end up having to pay taxes than it is to underpay and face consequences.