Advice on Additional Income Tax

Great question! Since Remotasks doesn’t withhold taxes, you are considered self-employed for this income, and it’s crucial to handle the tax obligations correctly to avoid penalties later.

Here’s a breakdown of how to handle your taxes:

1. Understand the Types of Taxes You’ll Owe

For your Remotasks income, you’ll be responsible for the following taxes:

a. Self-Employment Tax (FICA) – 15.3%

This covers Social Security (12.4%) and Medicare (2.9%) taxes.
You pay both the employer and employee portions of these taxes since you’re self-employed.

b. Federal Income Tax

This is based on your total taxable income, including your regular job and the $4,000 side income.
Your federal tax rate depends on your marginal tax bracket:
- Earning $70K-$80K annually likely puts you in the 22% federal tax bracket for 2023, meaning some portion of your Remotasks income will be taxed at 22%.

c. State and Local Taxes

Depending on where you live, you may owe state income taxes and, in some cases, city/local taxes. State tax rates vary, but you can estimate 3%-6% unless you live in a no-income-tax state (e.g., Texas, Florida).

2. Estimate How Much to Set Aside

A good rule of thumb is to set aside 25%-30% of your side income for taxes. Here’s why:

Breakdown on $4,000 Side Income

Self-Employment Tax (15.3%): $4,000 × 15.3% = $612
Federal Income Tax (~22%): $4,000 × 22% = $880
State/Local Tax (5% average): $4,000 × 5% = $200

Total Estimated Tax Liability: ~$1,692 (~42% of your side income)

Since your full-time job likely uses up most of the lower tax brackets, a conservative approach is to set aside 30% of your side income.

3. File and Pay Taxes

a. Quarterly Estimated Taxes

Because Remotasks doesn’t withhold taxes, you’re required to make quarterly estimated tax payments to avoid underpayment penalties.
Use IRS Form 1040-ES to calculate and pay your estimated taxes. Payments are due:
- April 15 (Q1), June 15 (Q2), September 15 (Q3), and January 15 (Q4 of the following year).

b. Deduct Business Expenses

If you incurred expenses while earning this income (e.g., internet, a portion of your home office, or equipment), you can deduct them to reduce your taxable income.
Keep detailed records of these expenses and receipts. Use IRS Schedule C (Profit or Loss from Business) when filing your taxes.

c. Year-End Tax Filing

At the end of the year, Remotasks should issue you a Form 1099-NEC if you earned more than $600.
You’ll report this income on your Form 1040 and attach Schedule C (to report income and expenses) and Schedule SE (to calculate self-employment tax).

4. Simplify the Process

Open a Savings Account: Create a dedicated account for taxes and transfer 30% of your monthly side income into it.
Use Tax Software or a CPA: Tax software like TurboTax Self-Employed or H&R Block can help calculate and file your taxes accurately. A CPA can be especially helpful if you have significant deductions or want to avoid missteps.
Track Expenses: Use tools like QuickBooks or a simple spreadsheet to track your earnings and deductible expenses.

Action Plan

Set aside 30% of your monthly Remotasks income (~$120/month).
Make quarterly payments to the IRS using Form 1040-ES (you still have time to pay for Q4 by January 15).
Keep a log of all business-related expenses to lower your taxable income.
At tax time, file using Schedule C and Schedule SE to account for self-employment taxes.

By staying proactive, you’ll avoid surprises and penalties—and maximize your side hustle earnings! If you need detailed guidance for your specific state or deductions, consulting with a CPA is a great investment.