Personal Finance / Unit 1: Earning Income
1.6 Side Income and Self-Employment
Notes
Income can come from more than one source, such as a part-time job, freelancing or selling items.
- A side income (side hustle) is money earned outside your main job.
- If you are self-employed (an independent contractor), no employer withholds taxes. You usually receive a 1099 form instead of a W-2 and must set aside money for taxes yourself.
- Side income is generally taxable, even when it is small or paid in cash.
- Revenue is money coming in; profit = revenue minus expenses.
- Example: you mow lawns and earn $600 but spend $150 on gas and supplies. Profit $= 600 - 150 = 450$, so $450.
- Setting aside a share of each payment (say 20%) can help cover taxes: 20% of $450 is $90.
Practice
Which form is most commonly given to an independent contractor instead of a W-2?
Contractors typically receive a 1099 and handle their own tax payments.
Luis earns $900 from tutoring and has $200 in expenses. What is his profit?
Profit is revenue minus expenses: $900 - 200 = 700$.
Which statement about side income is correct?
Income is generally taxable no matter the source or the form of payment.
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