How should I report income from my small side business? (expecting $10,000-$15,000 revenue)

I recently started a small side business doing graphic design work for local restaurants and it's starting to get some momentum. Just finished my first big project that brought in about $2,500, and the client already wants me to work on a few more projects for their locations. I started looking into whether I should create an LLC, but after some online research, I'm seeing mixed advice about whether it's worth it if I'm making under $50,000 a year. This is definitely just a side thing - I still have my regular day job. What's the best way to report this income for taxes? Do I need to set up any kind of official business entity to keep doing this work legally? I'm guessing I'll make somewhere between $10,000-$15,000 in revenue this year if things continue at this pace. Any advice would be appreciated since I've never had to deal with self-employment income before!

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18 comments

Avery Saint

•8M

The good news is you don't need to form any business entity to operate legally - you can run your graphic design business as a sole proprietorship, which is the default when you start making money without forming a legal entity. For tax reporting, you'll report this income on Schedule C (Profit or Loss From Business) that you'll file along with your personal tax return. You'll calculate your business profit by subtracting your business expenses from your revenue. This might include software subscriptions, equipment, marketing costs, etc. The resulting profit is what you'll pay taxes on. Since this is self-employment income, you'll also need to pay self-employment tax (Social Security and Medicare) using Schedule SE. This is approximately 15.3% on top of your regular income tax. One important thing: if you expect to owe more than $1,000 in taxes from this side business, you should make quarterly estimated tax payments to avoid an underpayment penalty when you file.

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Avery Saint

•8M

For quarterly payments, you can use Form 1040-ES to calculate your estimated tax. If your income varies, you can use the "annualized income installment method" on Form 2210 when you file your return, which allows you to pay quarterly based on what you actually earned during each period rather than 25% of your annual estimate. Yes, you can deduct a portion of your internet bill as a business expense, but only the percentage used for business purposes. Keep good records of how you calculate this split. Same goes for any home office space, cell phone usage, or other shared personal/business expenses. Just make sure you have a reasonable method for determining the business portion.

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Keith Davidson

•8M

I was in exactly the same boat last year with my photography side hustle. After trying to figure it all out myself, I ended up using https://taxr.ai to analyze all my business receipts and expenses. It honestly saved me hours of headaches trying to sort through what was deductible and what wasn't. The platform actually helped me understand that I could deduct things I hadn't even considered, like a portion of my car insurance for business travel and even some meals when I was meeting with clients. It also made tracking my quarterly estimated payments way easier than the manual calculations I was attempting.

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Keith Davidson

•8M

It did help clarify the LLC question - basically showed me that as a sole proprietor making under $30K, an LLC wasn't necessary from a tax perspective. The tool explained that an LLC mainly provides liability protection but doesn't change how you're taxed unless you elect for S-Corp status (which only makes sense at higher income levels). Regarding accuracy, I was skeptical too initially. What convinced me was that the tool references specific IRS publications and tax code for its recommendations. I actually cross-checked some of the deductions it suggested with my accountant friend who confirmed they were legitimate. The platform is built on tax code analysis rather than general advice, so it's giving you information based on actual tax rules rather than opinions.

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Ana Erdoğan

•8M

Just wanted to update that I actually tried taxr.ai after my skeptical comment above, and I'm genuinely surprised at how helpful it was. I uploaded my messy pile of receipts and business transactions, and it organized everything into proper tax categories automatically. The most valuable part was how it identified several deductions I'd been missing - particularly around my home office setup and business mileage. It calculated that I was leaving about $1,800 in deductions on the table from last year. The quarterly tax payment calculator also helped me avoid those nasty underpayment penalties I got stuck with last year. Not gonna lie, I was totally wrong to be suspicious. Saved me both money and the headache of trying to interpret IRS publications myself.

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Sophia Carson

•8M

If you're having trouble reaching the IRS to get your questions answered, try https://claimyr.com - they got me through to an actual person at the IRS in 15 minutes when I was trying to sort out my freelance income questions. I spent days trying to call myself and never got through. You can actually watch how it works in a demo here: https://youtu.be/_kiP6q8DX5c I was dealing with a 1099-K issue from my side business last year and literally couldn't get anyone on the phone for weeks. Used the service because I was desperate, and they somehow managed to get me through to a real IRS agent who helped sort everything out. The agent confirmed exactly how I should be reporting my side business income and what documentation I needed to keep.

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Sophia Carson

•8M

It's actually not sketchy at all - they use a combination of proprietary software that navigates the IRS phone tree and knows exactly when to call to minimize wait times. They're essentially doing the waiting for you, then connect you once they've gotten through to a representative. It's completely legit - you're actually talking directly to an IRS agent, not anyone from the service itself. They don't use robocalling - that would be against IRS rules. They just have technology that can stay on hold indefinitely and knows the optimal times to call based on IRS staffing patterns. Once they get an agent, they connect you directly. You only share your personal information with the actual IRS representative, not with the service.

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Brooklyn Foley

•8M

I'm back to eat my words about Claimyr. I was 100% convinced it was a scam, but I was completely desperate after getting a confusing letter about my side business income. Tried calling the IRS for three days straight and couldn't get through. Finally gave Claimyr a shot yesterday and I seriously can't believe it worked. Got connected to an IRS agent in about 22 minutes who answered all my questions about Schedule C reporting for my side hustle. The agent walked me through exactly which form to use for my situation and clarified that I didn't need an LLC for tax purposes. For anyone like me running a small side business and confused about tax reporting, being able to actually speak with the IRS directly made all the difference. I'm honestly shocked this service actually delivered what it promised.

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Jay Lincoln

•8M

One tip nobody's mentioned - if you expect to make more than $400 in profit from your side business, you need to pay self-employment tax. Make sure you're setting aside roughly 30% of your profits for taxes (15.3% for self-employment tax plus your regular income tax rate). Also - keep ALL your receipts and track everything meticulously. I'd recommend a separate business bank account and credit card just for your side business expenses to make things super clear at tax time.

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Jay Lincoln

•8M

For your income level ($10-15K), I think a simple spreadsheet might be sufficient if you're organized, but QuickBooks Self-Employed is actually pretty reasonably priced and automates a lot. The time you save categorizing expenses and calculating quarterly taxes might be worth the subscription cost. What I like about dedicated accounting software is that it lets you snap photos of receipts on the go and automatically categorizes transactions. It also helps track mileage if you're driving for business purposes. Plus, when your business grows, you'll already have a system in place rather than trying to transition later.

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