One great way to treat your work more seriously is to separate your gig income into its own account. Whether it’s money from a gig economy platform, freelance site or side gig, you can stay better organized if it’s put into a separate account. Gig income is different than a typical paycheck. Depositing your earnings as they come in, into a dedicated account has some real advantages. You can choose to open a business checking account, or simply open a second checking account. Here’s how you can benefit from keeping your gig income earnings separate from your personal bank account.
Three Advantages to Keeping Your Gig Income in a Separate Account
1. Helps to Organize Income
It’s much easier to understand your business’s money flow when you deposit your gig income directly into a separate account. This will make bookkeeping so much easier. You’ll no longer have to sort through personal expenses and you’ll be minimizing potential for errors.
Having a clear picture of what earnings your gig income provides makes it much easier to track how much you are making for the time you are investing. It will let you know how successfully your business is operating. Then, you can adapt to make certain your gig is overall beneficial to you and your goals.
2. Track Expenses Easily
It’s important to know how much you’re spending as a business. First of all, it can answer the question of whether you’re making enough to cover all expenses. Secondly, it’s important for tax purposes to have a clear record of what you are spending on for your business. So often people overpay on their taxes because they do not keep proper records of business expenses. Having a dedicated business account lets you easily pay costs while also tracking them in a single location.
3. Preparing for an Audit
In addition to providing all-around tax advantages in the clarity it introduces to recording earnings and expenses, a separate bank account can help out in case of an audit. There’s no better proof of gig income and expenses than a devoted bank account.
As you prepare to file taxes for 2020, you may find that accounting for your gig income feels complicated, especially when it comes to getting proper credit for any expenses you may have incurred. Having a separate bank account can make this process much simpler going forward, and can even provide some protection in the case of an audit. As we look into the coming year, it’s important to set goals for the future, why not make managing your gig income better one of them?
About the Author: Alexandra Mendez-Diez has worked as a freelance writer and editor for the past decade. She loves that the job entails writing about such a wide variety of topics, ranging from cattle-handling best practices to how-to guides for tracing ancestry through cookbooks, with all kinds of exciting stops along the way.