During the pandemic, many people became gig workers due to the economic slowdown or simply to make a few extra dollars. Gig workers are defined as independent contractors, online platform workers, contract firm workers, on-call workers and temporary workers.
What most did not know is these great flexible small businesses have a number of financial benefits, and requirements, which should be reviewed before the end of the year.
The last month of the year is here and we just adjusted our clocks back an hour for the coming of winter. If you are one of those workers that pivoted to the gig economy during the pandemic, I have a few tips to help you take advantage of your new small-business status.
Be sure to set aside money for taxes. As a gig worker, taxes may not have been taken out of the payments you received for your work. Now is the time to start thinking about having money available for those taxes. It is the time to connect with a tax professional and explore options to ensure you are covered for this tax obligation early next year. The last thing any gig worker wants is a big surprise tax bill in 2022.
Create a reserve account. Gig small businesses can easily make a significant amount a money over a short time, such as driving ride-share over a busy weekend. Take the opportunity during this time to create a reserve savings account for the times that are little bit slower in your gig work. You can target a specific percentage of your income to save or maybe allocate a set dollar amount to a small- business savings account on a regular basis.
Save smart for retirement. Gig workers that qualify as small-business owners may also be able to make tax-deductible contributions to a flexible Simplified Employee Pension (SEP) IRA that is easy to set up and maintain. A SEP plan may work well if you want a low-cost, easy-to-maintain retirement plan. Both SEP IRA and traditional IRA contributions may be made to the same account and you have the flexibility to change how much your gig small business contributes from year to year.
Having a gig small business could be a great flexible business opportunity in today’s economy. However, you should be aware of both the financial opportunities and requirements that go along with this new career.
Brandon Meredith is the small business leader for Wells Fargo in Utah.
