Do I Really Have to Report Income From My Side Hustle?

Financial Horizons: Insights for Building Wealth and Securing Your Legacy

By Dr. Jose G. Cardenas, Chief Tax Strategist at The C & R Group, LLC

Reality check—almost everyone has a side hustle now. Side hustles are the new normal.

DoorDash, Uber, Airbnb, Etsy, coaching, consulting, graphic design, social media management, haircutting in your garage, selling on Marketplace… the list is endless.

And somewhere in the middle of the grind, the question hits:

“Do I really have to report this on my taxes? I mean… it’s just a side hustle.”

Here’s the straightforward answer:

Yes. If you earned income, the IRS expects to see it—no matter what you call it and no matter how you got paid.

But there’s another side to this:
If you treat your side hustle like a real business, you may also unlock real deductions and strategy that can help you keep more of what you earn.

Let’s break it down.

Side Hustle = Income the IRS Cares About

It doesn’t matter whether you:

• Get a 1099-NEC, 1099-K, or no form at all
• Are paid by cash, Zelle, Venmo, Cash App, PayPal, Stripe, or direct deposit
• Call it “extra money,” “freelance,” “tips,” or “side cash”

If you got paid for providing goods or services, that’s taxable income in most cases.

The myth is, “If I don’t get a form, I don’t have to report it.”
The reality is, you must report all income, whether or not a form shows up.

Side Hustle Income Is Usually Self-Employment Income

When you’re not an employee (no W-2), the IRS usually sees your side hustle as self-employment.

That means two big things:

1. Income Tax
   You pay tax on your profit (income minus allowable expenses).
2. Self-Employment Tax
   This covers the Social Security and Medicare portion that’s automatically taken out when you’re on a W-2 job.
   As a self-employed person, you’re responsible for both the employee and employer pieces of that.

Is it fun? Not really.
Is it the price of being your own boss? Absolutely.

But here’s where it gets interesting…

If You Report the Income, You Can Deduct the Expenses

If you pretend your side hustle income doesn’t exist, you also throw away one of the biggest benefits you have as a self-employed person: legitimate business deductions.

When you report your side hustle as a business, you may be able to deduct expenses that are:

• Ordinary and necessary for your work (in the eyes of the IRS)
• Properly documented

Depending on your hustle, that might include things like:

• Mileage or a portion of vehicle expenses (for business use)
• Supplies, software, and tools you use to do the job
• A portion of your phone and internet (business use)
• Advertising, website, and branding expenses
• Certain education and training directly related to the business

Now we’re not talking about “write off your whole life” nonsense you see on social media. We’re talking about legit, defensible deductions that can reduce your taxable profit and lower your overall tax bill.

Hobby or Business—Why It Matters

The IRS looks at your activity and asks:

“Is this a real business with a profit motive, or just a hobby that sometimes makes money?”

Why does that matter?

• A business can generally deduct eligible expenses against its income.
• A hobby still requires you to report income, but your ability to deduct expenses is much more limited.

Things the IRS may consider:

• Are you trying to make a profit and acting like a real business?
• Do you keep records and books?
• Do you adjust what you’re doing to improve profitability?
• Is this something you do regularly, or once in a while for fun?

If you want the benefits of business treatment, run your side hustle like a business.

The Side Hustle Tax Trap: No Withholding, Big Bill Later

At a W-2 job, taxes are withheld automatically from each paycheck.

With a side hustle, that doesn’t happen unless you set it up yourself.

So what happens?

• You make money all year.
• No taxes are taken out.
• At tax time, you get a surprise bill for income tax and self-employment tax.

If your side hustle is growing, you want to get ahead of this by:

• Setting aside a portion of each payment in a separate savings account for taxes
• Possibly making quarterly estimated tax payments so you’re not hit with penalties
• Working with a professional to dial in how much to set aside

You wouldn’t launch a business without a plan for rent, inventory, or marketing. Taxes are just another line item to plan for.

Simple Systems to Keep Your Side Hustle Tax-Ready

You don’t need to become a full-time bookkeeper. You just need simple, consistent habits.

Try this:

1. Use a Separate Account
   Run all side hustle income and expenses through a dedicated checking account.
   This alone makes recordkeeping 10x easier.
2. Track Income & Expenses Monthly
   Spreadsheet, app, or basic bookkeeping software—whatever you’ll actually use.
3. Save Receipts (Physical or Digital)
   Snap pictures, store PDFs, or use an app. Just make sure you can prove what you spent and why.
4. Note What Each Expense Is For
   “$45 – Canva subscription for design business”
   “$120 – fuel for rideshare driving 3/10–3/12”
5. Review With a Pro at Least Once a Year
   Especially as your side hustle income grows, a strategist can help you:
   Capture all valid deductions
   Avoid red-flag behavior
   Evaluate whether an entity (like an LLC or S corp) makes sense down the road

Why Reporting Your Side Hustle Is Part of Building Wealth

This isn’t just about “being compliant.” It’s about playing the long game.

When you properly report your side hustle:

• You build verifiable income that can help you qualify for loans, mortgages, or business credit.
• You develop clean financials that make it easier to scale or even sell your business someday.
• You sleep better knowing you don’t have undeclared income that could come back to haunt you.

Short-term thinking says, “If I don’t report it, I keep more.”
Long-term thinking says, “If I do this right, I can build something bigger without looking over my shoulder.”

Final Thoughts: Treat Your Side Hustle Like the Business It Deserves to Be

If your side hustle is generating income, the IRS absolutely expects to see it.

But instead of fearing that, use it as a signal:

“I’m building something. It’s time to put a real financial strategy behind it.”

Reporting all your income isn’t the enemy.
Lack of planning is.

If you want help:

• Reporting your side hustle correctly
• Structuring it for maximum legal tax efficiency
• Building a simple system so you’re not scrambling every April

…that’s exactly what my team and I do.

🔗 Read more at: www.thecrgroupllc.com/blog

📅 Ready to put a real tax strategy behind your side hustle?
Book a consultation with Dr. Cardenas

About the Author

Dr. Jose G. Cardenas is a retired U.S. Army Finance Officer and the Chief Tax Strategist at The C & R Group, LLC. With a Doctorate in Business Administration and over 20 years of experience in tax planning and financial strategy, Dr. Cardenas helps side hustlers, self-employed professionals, and business owners reduce taxes legally, protect their wealth, and build scalable, legacy-focused businesses. Learn more at www.thecrgroupllc.com

📌 Disclosure

This article is for educational and informational purposes only and is not intended to serve as personalized legal, tax, or investment advice. Tax rules regarding self-employment, business deductions, hobby income, and reporting requirements are complex and subject to change. You should consult with a qualified tax professional or review official IRS guidance for the current year before making decisions. Dr. Jose G. Cardenas, DBA, provides tax advisory services through The C & R Group, LLC. Insurance and investment strategies may be offered through his role as a licensed financial professional affiliated with Experior Financial Group.

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