Money Management

Don’t gloss over any of these important tasks. 

Many people struggled with inflation in 2022 and took on a side hustle to cope with it. So if you went that route, you were in good company. Or maybe you had a different reason for working a second job in 2022, like saving up to buy a home, refurnish your apartment, or pay off your credit cards.

A 2022 report from Zapier found that 40% of Americans held down a side hustle in 2022. That’s a big jump from the 34% of people who had one as of late 2020.

But working a side hustle could have different tax implications. So if you took on a side gig last year, here are some key moves to make early on this year.

1. Gather all of your receipts and documentation

It’s important to know how much money you earned from your side hustle so you can report that information accurately to the IRS. Look through your bank account statements and tally up your total earnings. You can’t necessarily rely on your clients to give you tax forms summarizing your earnings, especially if you didn’t earn at least $600 from each one (which is the threshold that requires companies to issue a tax form).

At the same time, look at your credit card statements and gather all of your receipts so you know what deductions to claim for your side hustle. You’re allowed to deduct the costs you incurred to earn that money if you were paid on a freelance basis. So if you had to hail a rideshare to go back and forth from your tutoring gig, that’s an expense you’ll want to look at writing off.

2. Hire an accountant for help with your 2022 tax return

A side hustle has the potential to complicate your tax situation. That doesn’t mean you’ll lose out financially — it just means there may be more work to do when filing your tax return. So make a point to find yourself a good accountant for help with your 2022 taxes before we get too deep into the filing season and everyone gets booked.

3. If you’re keeping your side hustle, make plans for estimated tax payments

When you’re paid for a side hustle on a freelance basis — meaning, there are no taxes taken out of your earnings upfront — you’re supposed to pay the IRS a portion of your earnings on a quarterly basis. If you didn’t do that in 2022, and you’re continuing to work your side hustle in 2023, set up those estimated payments so you don’t forget about them. An accountant can help you calculate the right amount to pay the IRS each quarter based not just on your projected side gig wages, but your total income picture.

Working a side hustle last year may have done great things for your finances. But make these moves sooner rather than later to benefit from a tax perspective and avoid trouble with the IRS this year for failing to pay taxes on that extra income.

Our picks for best tax software

Our independent analysts pored over the perks and user reviews for the most popular tax provider services to land on the best-in-class picks to file your taxes. Get started by reviewing our list of the best tax software.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Image source: Getty Images
What happened Tax season is upon us, and some taxpayers know they can file their federal taxes for free through the IRS Free File program. Select tax preparation companies partner with the IRS to offer free federal electronic tax filing to eligible taxpayers with an adjusted gross income (AGI) of $73,000 or less. But it turns out not everyone is putting the program to use. So whatMany taxpayers are paying fees to file their federal tax returns despite qualifying for free filing. According to the National Taxpayer Advocate, the IRS Free File program goes largely unused.
Discover: Find the best tax software for your situation hereSave: We researched free tax software and put together a list of the best here
In a 2022 report to congress, the organization said, “In PY 2022, only two percent of all taxpayers used Free File, the result of the IRS’s Free File Inc. partnership with the tax return preparation industry. This is the case even though the IRS targets Free File eligibility at 70 percent of taxpayers.”Considering that only a small percentage of taxpayers used the program in 2022, it’s likely that many taxpayers don’t know that the IRS Free File program exists or who qualifies for it. Now whatDon’t miss out on the chance to save money. Taxpayers with an adjusted gross income (AGI) of $73,000 or less qualify for the IRS Free File program. Several tax preparation companies participate, and each company outlines eligibility requirements on the IRS Free File website. It’s worth noting that taxpayers may need to pay state tax filing fees. If you don’t qualify for this program, check to see if you are eligible for other free or low-cost programs to make filing your taxes more affordable. Here are five alternate options: Free File Fillable Forms: All taxpayers, regardless of income or age, can file their taxes at no cost using Free File Fillable Forms. Volunteer Income Tax Assistance (VITA): This program is available to people who make $60,000 or less, people with disabilities, and limited English-speaking taxpayers who need assistance preparing their tax returns. MilTax: The Department of Defense partners with MilTax to provide free tax preparation services to active-duty service members and their families, members of the National Guard and reserves, and eligible retired and honorably discharged service members. Tax Counseling for the Elderly (TCE): Volunteers are available to provide free tax help to seniors ages 60 and older. Local tax preparation programs: Free or low-cost tax preparation services may be available at local community centers, libraries, and schools. If you’re on a tight budget, see if these programs are available in your area.With today’s high living costs, there’s no point in wasting money on a service you can get for free. By taking advantage of free or low-cost tax filing programs, taxpayers can keep more money in their checking accounts.If you don’t qualify for these programs, our list of the best tax software can help you find a tax filing option that works for you. No one enjoys filing taxes, but software can make it easier. Our picks for best tax softwareOur independent analysts pored over the perks and user reviews for the most popular tax provider services to land on the best-in-class picks to file your taxes. Get started by reviewing our list of the best tax software.We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy. 

What happened

Tax season is upon us, and some taxpayers know they can file their federal taxes for free through the IRS Free File program. Select tax preparation companies partner with the IRS to offer free federal electronic tax filing to eligible taxpayers with an adjusted gross income (AGI) of $73,000 or less. But it turns out not everyone is putting the program to use.

So what

Many taxpayers are paying fees to file their federal tax returns despite qualifying for free filing. According to the National Taxpayer Advocate, the IRS Free File program goes largely unused.

In a 2022 report to congress, the organization said, “In PY 2022, only two percent of all taxpayers used Free File, the result of the IRS’s Free File Inc. partnership with the tax return preparation industry. This is the case even though the IRS targets Free File eligibility at 70 percent of taxpayers.”

Considering that only a small percentage of taxpayers used the program in 2022, it’s likely that many taxpayers don’t know that the IRS Free File program exists or who qualifies for it.

Now what

Don’t miss out on the chance to save money. Taxpayers with an adjusted gross income (AGI) of $73,000 or less qualify for the IRS Free File program. Several tax preparation companies participate, and each company outlines eligibility requirements on the IRS Free File website. It’s worth noting that taxpayers may need to pay state tax filing fees.

If you don’t qualify for this program, check to see if you are eligible for other free or low-cost programs to make filing your taxes more affordable.

Here are five alternate options:

Free File Fillable Forms: All taxpayers, regardless of income or age, can file their taxes at no cost using Free File Fillable Forms. Volunteer Income Tax Assistance (VITA): This program is available to people who make $60,000 or less, people with disabilities, and limited English-speaking taxpayers who need assistance preparing their tax returns. MilTax: The Department of Defense partners with MilTax to provide free tax preparation services to active-duty service members and their families, members of the National Guard and reserves, and eligible retired and honorably discharged service members. Tax Counseling for the Elderly (TCE): Volunteers are available to provide free tax help to seniors ages 60 and older. Local tax preparation programs: Free or low-cost tax preparation services may be available at local community centers, libraries, and schools. If you’re on a tight budget, see if these programs are available in your area.

With today’s high living costs, there’s no point in wasting money on a service you can get for free. By taking advantage of free or low-cost tax filing programs, taxpayers can keep more money in their checking accounts.

If you don’t qualify for these programs, our list of the best tax software can help you find a tax filing option that works for you. No one enjoys filing taxes, but software can make it easier.

Our picks for best tax software

Our independent analysts pored over the perks and user reviews for the most popular tax provider services to land on the best-in-class picks to file your taxes. Get started by reviewing our list of the best tax software.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.

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Image source: Getty Images
What happenedOf U.S. consumers, 85% say they feel more secure in the rest of their lives when their credit score is healthy, according to a national survey released by FICO last week. It also found that about one-third of Americans feel financially insecure, and 43% say the unstable economy is a barrier towards achieving financial goals. The survey results suggest that even during periods of economic uncertainty, good credit helps people feel more in control.”Knowing that access to credit is a key building block for achieving financial goals, it’s easy to understand why credit scores would be a significant factor in overall well-being,” said Sally Taylor, vice president and general manager of FICO® Scores, in the news release. She added that “healthy credit habits can help people gain access to the credit they need to reach their financial goals, like get an education, cover medical expenses, or buy a first home.”
Save: This credit card has one of the longest intro 0% interest periods aroundMore: Save while you pay off debt with one of these top-rated balance transfer credit cards
So whatYour credit score is a crucial part of your overall financial health. Lenders check it when you apply for credit, so a good credit score can get you access to lower interest rates and higher quality lending products, including with:MortgagesAuto loansCredit cardsPersonal loansAccess to credit is far from the only way your credit score affects your life. Landlords run credit checks during rental applications, so your credit score could be the difference in getting approved for a place to live. Utilities companies may require a security deposit to provide service if you don’t have good credit. And in many states, your credit can even impact your insurance rates.Now whatIf you don’t know it yet, learn how to get your credit score. While there are multiple types of credit scores, it’s best to look up your FICO® Score, because that’s the most widely used by lenders. There are multiple free services that provide your FICO® Score, with Discover® Credit Scorecard being one popular option.Improving your credit score is simpler than you might think. There are really only a few things you need to do to build and maintain a top-tier credit score:Pay credit accounts on time. Always pay by the due date for any credit cards and loans you have. Even a single late payment that’s 30 days or more past due can do serious damage to your credit score.Use your credit card every month. When you use your credit card monthly and pay the bill on time, it helps you build a positive payment history. If you don’t have a credit card yet, look at starter credit cards you can get with no credit history.Keep your card’s balance below 30% of your credit limit. For example, if the credit limit is $1,000, keep the balance below $300 at all times. This is good for your credit utilization ratio, which affects your credit score.Top credit card wipes out interest until 2024If you have credit card debt, transferring it to this top balance transfer card secures you a 0% intro APR for up to 21 months! Plus, you’ll pay no annual fee. Those are just a few reasons why our experts rate this card as a top pick to help get control of your debt. Read our full review for free and apply in just 2 minutes.We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. Lyle Daly has no position in any of the stocks mentioned. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy. 

What happened

Of U.S. consumers, 85% say they feel more secure in the rest of their lives when their credit score is healthy, according to a national survey released by FICO last week. It also found that about one-third of Americans feel financially insecure, and 43% say the unstable economy is a barrier towards achieving financial goals. The survey results suggest that even during periods of economic uncertainty, good credit helps people feel more in control.

“Knowing that access to credit is a key building block for achieving financial goals, it’s easy to understand why credit scores would be a significant factor in overall well-being,” said Sally Taylor, vice president and general manager of FICO® Scores, in the news release. She added that “healthy credit habits can help people gain access to the credit they need to reach their financial goals, like get an education, cover medical expenses, or buy a first home.”

So what

Your credit score is a crucial part of your overall financial health. Lenders check it when you apply for credit, so a good credit score can get you access to lower interest rates and higher quality lending products, including with:

MortgagesAuto loansCredit cardsPersonal loans

Access to credit is far from the only way your credit score affects your life. Landlords run credit checks during rental applications, so your credit score could be the difference in getting approved for a place to live. Utilities companies may require a security deposit to provide service if you don’t have good credit. And in many states, your credit can even impact your insurance rates.

Now what

If you don’t know it yet, learn how to get your credit score. While there are multiple types of credit scores, it’s best to look up your FICO® Score, because that’s the most widely used by lenders. There are multiple free services that provide your FICO® Score, with Discover® Credit Scorecard being one popular option.

Improving your credit score is simpler than you might think. There are really only a few things you need to do to build and maintain a top-tier credit score:

Pay credit accounts on time. Always pay by the due date for any credit cards and loans you have. Even a single late payment that’s 30 days or more past due can do serious damage to your credit score.Use your credit card every month. When you use your credit card monthly and pay the bill on time, it helps you build a positive payment history. If you don’t have a credit card yet, look at starter credit cards you can get with no credit history.Keep your card’s balance below 30% of your credit limit. For example, if the credit limit is $1,000, keep the balance below $300 at all times. This is good for your credit utilization ratio, which affects your credit score.

Top credit card wipes out interest until 2024

If you have credit card debt, transferring it to this top balance transfer card secures you a 0% intro APR for up to 21 months! Plus, you’ll pay no annual fee. Those are just a few reasons why our experts rate this card as a top pick to help get control of your debt. Read our full review for free and apply in just 2 minutes.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. Lyle Daly has no position in any of the stocks mentioned. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.

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Will politics impact your investment portfolio? 

Bonds are a wise investment for those looking to diversify their portfolios, as they offer stability and security compared to other investments. However, recent news about the debt ceiling could have serious implications for investors in the bond market. Here’s how the fight over the debt ceiling can impact your bond investments.

What is the debt ceiling?

The debt ceiling has been around since 1917 when Congress established it as a way to control government borrowing. It puts a limit on how much money the federal government can borrow to cover its expenses. Currently, the U.S. spends more than it brings in. As a result, it has to borrow money to continue paying for programs such as Social Security, defense spending, and interest on our debt.

Since 1917, the debt ceiling has been raised over 110 times. The last time it was raised was in 2021, when it was capped at $31 trillion. On Jan. 19, 2023, the U.S. hit its debt ceiling and the Treasury Department has had to use “extraordinary measures” so the government can continue to pay its bills. This means Congress will need to pass legislation to raise the debt ceiling so the U.S. is able to continue paying its bills.

How could this affect bond investors?

If Congress does not reach an agreement on how much to raise the debt ceiling, it could lead to a default on bonds held by investors. Bondholders would not receive their payments or interest due from these bonds, resulting in losses for those who have invested in them. If the government is unable to make payments to lenders who hold federal debt — known as a default — then the government will have to pay higher interest rates, just like when a borrower misses a credit card payment.

Additionally, if a default occurs, it could cause a ripple effect throughout other markets such as stocks and real estate, which rely heavily on bond liquidity. U.S. Treasury bonds are considered to be one of the safest investments in the world, so any default would significantly impact the nation’s credit rating and destabilize bonds all across the world.

How can investors protect themselves?

The best advice for investors is to stay informed about what’s happening with the debt ceiling debate in Washington. It can help you make better decisions when investing in bonds. While the chances of a default are low, if you already have bonds in your portfolio, consider diversifying into other investments so you won’t be too heavily exposed. Additionally, make sure you are aware of any risks associated with investing in bonds and do your research before investing any more so you stick to your financial plan.

Investors should not underestimate the potential impact of the current debt ceiling situation. It could lead to default on these securities if Congress does not reach an agreement in the next several months. It is important for investors to stay informed about this issue and consider diversifying their portfolios if they are heavily invested in bonds. By taking these steps now, investors can ensure they are prepared if a default occurs.

Our best stock brokers

We pored over the data and user reviews to find the select rare picks that landed a spot on our list of the best stock brokers. Some of these best-in-class picks pack in valuable perks, including $0 stock and ETF commissions. Get started and review our best stock brokers.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

 Read More