You Have a Side Hustle. The IRS Has a Deadline.

Becca Hartwell: Welcome back to Money Unlocked. I'm Becca Hartwell, here with my co-host Maya, and okay, we have a spicy one today. Maya: Spicy how? Like, oh, that's interesting spicy or I owe the IRS money right now spicy? Becca Hartwell: The second one. Possibly the second one for a lot of people listening. Maya: Okay, okay, okay. Becca Hartwell: So here's the thing. The Q2 estimated tax deadline? According to NerdWallet, is June 16th. That is one week from today. One week. One week. And if you have any kind of freelance income, side hustle, gig work, and nobody's pulling taxes out of your paycheck for it, this deadline is on you. Maya: the IRS is not going to text you a reminder is what you're saying. Hard no. So we're going to walk through the whole thing today. All right, let's get into it. What are we actually covering? Becca Hartwell: Okay, so first, why gig income hits harder than a regular paycheck tax-wise. Plot twist, you're paying both sides of Social Security and Medicare yourself. That's a combined 15.3%. Before income tax even enters the picture. Wait, both sides? Both sides. We'll show you the math on a $30,000 earnings example, and the number is going to sting a little. Just a little. Then we get into how actually calculate what you owe. Two different methods, one of them is shockingly simple, AND Maya: Uh-huh. Becca Hartwell: There's Maya: -huh. Becca Hartwell: a W-4 workaround for anyone who also has a regular job. Oh, that one's good. I feel like people don't know about that. Most people don't. And we close with the step-by-step on IRS Direct Pay so you can handle this today. Maya: Okay, no overwhelm, just action. Let's go. Becca Hartwell: Let's go right after this. OK, so get this. There's a tax deadline one week from today, and I would bet most people listening right now have zero idea it exists. Maya: Wait, seriously? I thought taxes were an April thing. Becca Hartwell: Right? That's exactly what makes this so sneaky. According to NerdWallet, the IRS expects you to pay taxes as you earn, not just once in April. And if nobody's withholding from your paychecks, think. Uber, DoorDash, Etsy, that job falls entirely on you. Okay, okay, okay, so like four times a year? Four times a year. And the second one, Q2, is due June 16th, Maya: Wow! Becca Hartwell: this Monday. This Monday? As in seven days from now? Seven days. June 15th is a Sunday, so the IRS bumps it to the 16th. NerdWallet confirmed the date. Alright, and who's actually on the hook for this? Like, Maya: Is this everyone? Not everyone, but if you drive for a rideshare app, sell anything on Etsy, freelance on the side, do gig work of any kind, yeah, you probably owe this. So basically half our listeners. Basically. And here's the part that trips people up. Q2 only covers two months of income, April and May, but it hits just 60 days after Q1. Wait, wait, wait. Two months of income, but still a full quarterly payment? Becca Hartwell: Yep. According to Instead, that compressed timeline catches a lot of first-year gig workers completely off guard. You just paid in April and now you owe again. Maya: That does seem fast. I mean, I get it, but ouch. Becca Hartwell: Very ouch. And missing it isn't free. Instead reported the underpayment penalty runs near 8% annually right now. It starts accruing the day you miss it. Maya: No grace period. No grace period. Okay, so the deadline's real, the penalty's real, but I think what I actually want to know is why does this even exist? Like, why is gig income taxed so differently in the first place? That is the right question, because once you see how the IRS treats gig income versus a W-2 paycheck, the whole quarterly system actually starts to make sense, and the number attached to it, it's going to surprise you. Tchau. Becca Hartwell: So here's the thing about gig income that nobody warns you about. Your employer, when you had one, was quietly paying half your Social Security and Medicare taxes the whole time. Maya: Wait, half? I thought taxes just came out of my check. Becca Hartwell: Right, so your check shows 7.65% gone, but your boss was also sending another 7.65% directly to the IRS on your behalf. You never saw it. Maya: It was just handled. So someone was covering half my tax bill this whole time and I didn't even know it? Nobody tells you. And then you go freelance and suddenly you're the employee and the employer. Both halves are yours now. Okay, okay, okay. So what's the actual number? According to NerdWallet, the self-employment tax rate is 15.3%. That's the money that funds Social Security and Medicare. Hmm. As a gig worker, you pay all of it. And that's on top of regular income tax? On top of it. Completely separate, which is the part that destroys first-year side hustlers. Becca, walk me through what that actually looks like in dollars. Okay, so the Finhabits gig worker guide puts it really clearly. Say you make $30,000 from gig work, driving, freelancing, whatever. You're looking at roughly $4,600 in self-employment tax? Becca Hartwell: tax alone. Then stack your regular income tax on top of that, Maya: I don't Becca Hartwell: know. you're over $8,000 total on $30,000 on $30,000. And here's the mistake almost everyone makes. They treat gig income exactly like W-2 income. They figure, okay, I'll sort it out in April, which is what I would have assumed. Same. But the IRS doesn't care what you assumed. That $8,000 was supposed to be coming in throughout the year, not all at once in April, and that's exactly where the next problem lives, the quarterly payment thing. Yeah, because the IRS has a very specific opinion about Maya: Right. Becca Hartwell: when they want their money, and missing those windows, there's a penalty for that too. So here's the thing. The IRS is actually pretty upfront about. This whole system runs on pay as you go. Four deadlines a year, not one. Maya: Okay, what? Becca Hartwell: Walk me through those dates. According to NerdWallet, it's April 15th, June 16th, September 15th, and January 15th. Each one covers a specific window of income you already earned. Maya: So it's not one big bill at the end. It's more like four smaller ones spread out. Becca Hartwell: Exactly. And here's where people get wrecked. Maya: Mm-hmm. Becca Hartwell: First-year gig workers almost always assume they can just save it all and square up in April. April feels like tax time, right? Maya: That's literally what I would have done. Becca Hartwell: Right. And the IRS doesn't grade on a curve here. Miss Q1, pay everything in April, they still penalize you for the late Q1 payment, because by the time April rolls around, it's already too late for Q1. Yes! That's the whole thing. The IRS treats each quarter independently. Doubling up later does not erase the earlier miss. Maya: Wait, so even if you pay every dollar you owe, you can still get hit with a penalty. Becca Hartwell: Yep. Maya: Cool, cool, cool. The IRS is very fun. Becca Hartwell: Super fun. And the Instead article put it well, missing a deadline doesn't push the penalty to the next quarter. Maya: Ow! Becca Hartwell: The clock starts ticking from the specific due date you missed. So how bad is the actual penalty? Like, are we talking slap on the wrist or? Real, but not catastrophic, honestly. Jupids guide has the 2026 rate sitting around 8% annually, calculated quarter by quarter. So on a missed payment of, say, $2,000 for one quarter. Or, you're looking at something like forty dollars in penalties if you catch up two months later. OK, That's not nothing, but it's not devastating. Right: the problem is when you miss multiple quarters; those add up separately. Q1 penalty runs longer than Q2, which runs longer than Q3—so the earlier you miss, the more it compounds. Bingo. And look, the good news: there's actually a pretty clean workaround if you have a regular W-2 job alongside your side hustle. Maya: Ooh, I want to hear this. Becca Hartwell: So it comes down to one form and a conversation with HR. We'll get into that right now. Okay, so here is the part where some of you are going to feel genuinely relieved. Ooh, I like relief segments. What've we got? So if you have a regular W-2 job alongside your side hustle, you might not need the whole quarterly payment system at all. Maya: Wow. Becca Hartwell: You can just tell your employer to pull a little extra from each paycheck. Wait, that's it? I just ask HR? That is literally it. The IRS only cares that the right amount lands before you. before each deadline. It does not care which income it came from. Maya: Okay, okay, okay. So my day job paycheck is basically covering for my side gig. Becca Hartwell: Exactly. And the tool that figures out how much extra is the IRS Tax Withholding Estimator, which is free on irs.gov. You punch in your W-2 income, your expected side hustle income for the year, and it spits out a dollar amount to add per paycheck. Maya: Check. Becca Hartwell: So you're saying I could have just gone to irs.gov, filled out a calculator, and handed HR a new form this whole time? Maya: This whole time. Becca Hartwell: Ugh, I feel attacked. And here is the part most people miss. The W-4 is not a one-time form you fill out on day one and forget. Most people have not touched theirs since they were hired. Maya: That tracks. I don't think I've looked at mine since onboarding. Becca Hartwell: Right. And the IRS actually recommends in their pay-as-you-go guidance that you revisit it any time your income changes. New side hustle? Update it. Freelance project picked up? Update it. Maya: Okay, but I need to flag one thing. This handles the income tax side, right? Not the self-employment tax portion we talked about earlier. Becca Hartwell: Good catch. Maya: Yes, this covers income tax, not the 15.3% self-employment tax piece. But for smaller side hustles, getting the income tax covered through your paycheck often gets you close enough that the remaining gap is manageable. So it is not a perfect solution for everyone, but... But for a lot of W-2 workers with a modest side gig, it's genuinely the simplest path. Becca Hartwell: The two steps: run the IRS estimator, hand HR a new W-4. Done. And with the Q2 deadline literally one week out, today is the day to do this. Like today today. Today today. Now if you want to know exactly what you owe down to the dollar or this is your first year freelancing and you have no Maya: No prior tax return to reference? The math is a little different. Okay, walk me through it. Becca Hartwell: So here's the thing about figuring out what you actually owe right now. There are two paths, and one of them is shockingly simple. Okay, I'm in. What's path one? If you filed taxes last year, pull up your 1040. Find line 24, that's your total tax, divide it by four. That number is your quarterly payment. Maya: That's it? Becca Hartwell: That's it. The IRS calls this the safe harbor method. Pay 100% of what you owed last year, spread across four quarters, and they cannot penalize you, even if your income blows up this year and you end up owing way more in April. Wait, wait, wait, wait. So I could have a huge year, owe way more, and still no penalty? Zero penalty. You'll owe the difference in April, but no penalty on top of it. Okay, that tracks. But what about someone in their first year of side work, no prior return to look at? Right, so that's path two. This is where it gets good for first-year people. Take your best estimate of what you'll make this year from gig work, multiply by about 25 to 30 percent. That covers both income tax and self-employment tax for most people. Divide by four. That's your quarterly number. So on that $30,000 side income example we used earlier, Maya: Just earlier, we're looking at roughly $7,500 for the year. Becca Hartwell: Exactly, which breaks down to about $1,875 per quarter. Maya: Okay, that's a number I can work with. Becca Hartwell: And here's the piece most people miss completely. Deductions don't just matter at tax time, they matter right now. Maya: Because they lower the income the tax is calculated on. Becca Hartwell: Yes, your phone, mileage, any equipment you bought. Home office space used only for work? According to FinHabits gig worker guide, tracking those before the deadline actually cuts your Q2 payment down before you send it. So the common mistake is waiting until April to think about deductions. Every year, people think deductions are an April problem. They're a right-now problem. Track them now, pay less now. Hmm. So you've got your number, both paths. Speaker 3: Let's get you there. Becca Hartwell: And once you have it, actually paying it is even easier than the math. We're going to walk through that next. Maya: So now you've got your number. Here's how you actually send it. Becca Hartwell: And it. Maya: Okay, yes, this is the part I wanted to get to. IRS Direct Pay. That's it. Go to irs.gov, search Direct Pay, pull money straight from your bank account. Free, no account required. How long does it actually take? Five minutes, maybe? You choose estimated tax as the reason, select the Q2 period, Becca Hartwell: Wow. Maya: enter your bank info, done. Confirmation hits your email. Genuinely it? That's genuinely it-the IRS built something that doesn't require a PhD. Okay, okay, now what if someone skipped Q1 back in April and they're just hearing this now? Don't panic. According to Instead, missing Q1 means you're accruing a small penalty on that amount already. The move is to make both payments right now-the catch up and the Q2-and note it when you file. So not double the penalty, just, "Here's what I missed, here's what's current, Speaker 3: Right. Maya: move on." Exactly. The IRS has seen this before. Shockingly, yes. Speaker 3: Right? Maya: Now here's the habit piece: because paying on time once is table stakes, the real unlock is never scrambling for the money in the first place. The separate savings account thing. Yes. The day a gig payment lands, move twenty five to five to 30 percent straight into a separate account. Speaker 4: Mm-hmm. Maya: That account is not yours to spend. It just sits there. And by June 16th, the money's already waiting. No stress, no math on deadline day. You're literally just moving money from one account to the other. The IRS gets what it's owed. You don't get surprised. I like that framing. You're not losing money, you're just parking it earlier. Right. And here's the thing about all of this. Most people doing gig work find out about estimating. Estimated taxes the hard way, in April, with a bill they weren't expecting. You now know how this works before that happens. You've got the deadline, the math, Speaker 5: Yeah. Maya: the payment method, and the habit to keep it from ever sneaking up on you again. That's the whole system. You handled it. Okay, so if you came into this episode thinking taxes were strictly an April situation, I hope we just changed your mind. Speaker 6: Yeah, Maya's reaction mid-episode was basically all of us. Maya: Wait, seriously? I thought taxes were an April thing. Right? And that's the whole point. The Q2 deadline, June 16th per NerdWallet, is literally this week. Gig income has no automatic withholding, so the IRS expects you to show up. Speaker 6: Up four times a year yourself. And that employer-employee tax split that could walk through, that one hits different when you see the actual dollar math. Speaker 7: Mm-hmm. Speaker 6: So here's your one thing. Go to IRS Direct today. Takes 10 minutes. Free. No account needed. Just go. If this episode helped you out, share it with a friend who's doing gig work and probably has no idea this deadline exists. New episodes every Tuesday. Follow us wherever you listen and we'll catch you next. to next week. Thanks for being here. See you then.