File as Joint or file as business?

[Junokiwi]

Hi there, we file joint married taxes and my husband has a little side gig.  He earns maybe $200 a week.  Is it better to file taxes for his side gig together with our personal taxes for our regular jobs, or is it better to file as a business on a separate tax return?  In either case, do we deduct his business expenses the same way?

[Katherine S 63]

This is such a great questions!!!

I first want to give you a few links that talk about Self employment.

Self employment tax

Self employment tax hub with calculator

Self Employment income and expenses

If the company is only a sole proprietorship (not a S or C corp or Partnership), then you would report his income and expenses on your regular tax return.

This information would go on the Schedule C and flow to the 1040.  You will enter it as Self Employment Income.  The expenses will be entered in this section as well.

Please look over the SE employment Tax link because a lot of people do not realized that you will need to pay Social Security and Medicare taxes on any net income from the business.  

If you have a profit, then you might have some taxes due for this business.  You can either send in estimated taxes (see the links above) or change your W4 from your W2 income and add a bit more withholdings to that instead.  

Hope that is clear.  You can also reach out to us while you are doing your taxes and we can show you exactly where and how to enter Self Employment income and expenses.  This link shows you where this is located in the Turbo Tax software.

https://ttlc.intuit.com/turbotax-support/en-us/help-article/self-employment-taxes/report-income-self...

Please reach out again if you have other questions!!

Katie S.

[marctu]

@Junokiwi thank you for the question.  So, most side gigs are disregarded entities if they are incorporated, though more than likely your husband is just an unincorporated sole proprietor.  Therefore, he would be adding this business income and expenses to a Schedule C with the upcoming tax return for 2023. 

More than likely married filing jointly will still be your filing status even with the addition of a Schedule C for your husband’s side gig.

You did not say how much your other income is, nor whether the $200 a week was gross or net income.  Estimated taxes may want to be considered, but a lot depends on the other income and the tax withholding and the gross or net income of the side gig. 

In the abstract let’s do a quick example of income from the side gig.  For every $1,000 of net income, you would need to pay Self-Employment taxes of 15.3%, plus federal taxes, which range from 10% to 37%, and state taxes potentially as well.  Taking the lowest percentages, the tax would be 26.3%.   The tax bills could be significant, so you want to get out ahead of this and estimate what your net income is and make estimated payments.  There is nothing worse than an unexpected bill. 

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[mbexpert]

Hello!

It would depend on how his side gig business is structured. If he is a sole proprietor or single member LLC you would include his income and deduct hisexpenses on your married filing joint return. It would be reported on a schedule C and included in your personal return. You would need Turbotax Premium if you are preparing it online or Turbotax Home and Business if you are using the downloaded version. 

If he is structured as a Partnership , S Corp or C Corp he would file a separate business tax return using Turbotax Business.