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Don't forget to report side job income to the IRS

America is now, at least in part, a so-called "side gig" economy. An estimated 25 percent of us now have side jobs to generate additional income. Such things as driving for a ride-share service like Uber or Lyft, dog-walking, renting out a residence part-time through Air BNB or Home Away, and being a freelance digital personal assistant can provide enough extra money to cover expenses, save for a big purchase or pay down debt. These so-called "side hustles" add billions of dollars in income to the national economy each year.

If you are one of the millions working side jobs, it is vitally important to keep this in mind: that additional income from jobs and hobbies must be reported to the IRS and to state taxing authorities. Many Americans, particularly the "Millennials," aren't doing this, leaving themselves vulnerable to audits, penalties, and even criminal tax crime charges. An estimated $214 billion in side job earnings go unreported (and thus untaxed) each year.

Oftentimes, the failure to declare the income is innocent; people may assume that the extra money is of such a low level (financial site Finder.com reports that side jobs bring in an average of $3,000 per person) that it isn't reportable. In other cases, though, income isn't reported because it is primarily in case and "what the IRS doesn't know won't hurt them."

IRS penalties and consequences

When in doubt, err on the side of over-reporting income rather than under-reporting. If the income is not taxable, you could be due a refund. If it is, then you have covered your bases. Unless you declare the funds, though, you are running the risk of serious consequences. The IRS will not hesitate to impose penalties, fines, interest, nor will they delay in bringing collection actions, levies and garnishments, or seeking tax evasion or fraud charges if applicable.

Even if innocent motives lead to under-reporting, consequences are possible. Do you have questions about side income reporting? Did you under-report and now need help dealing with the IRS to mitigate penalties? For answers to these and other tax-related questions, consult an experienced tax attorney.

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