If you braided hair, catered a party, drove for a rideshare app, or sold handmade goods at a pop-up shop and got paid through Cash App, Zelle, or Venmo, the IRS already knows about it. And if you didn’t report it, this tax season could be costly.
With the April 15 federal deadline weeks away, tax professionals are urging gig workers and side hustlers to get their finances in order before the IRS comes calling.
“Always report all of your money, regardless of how much it is,” said Aliah Minor, a Houston-based Business Tax Strategist. “Let’s write stuff off so that you don’t get something that says, ‘Hey, you are trying to evade us,’ other than you wrote off a bunch of stuff that you may be able to prove versus you not putting enough money on your return.”
The stakes are real. According to IRS guidelines, any gig worker who earns $400 or more in net income is required to pay a 15.3% self-employment tax, which covers Social Security and Medicare contributions. That obligation exists whether or not a worker receives a 1099-K form from a payment platform.
Under the One Big Beautiful Bill Act, which governs the 2025 tax year filed in 2026, the threshold for payment apps like Venmo and PayPal to issue a Form 1099-K has been reset to more than $20,000 and over 200 transactions. But tax professionals stress that this reporting threshold does not determine taxability. All income, even a $50 cash payment for a service, must still be reported.
“The misconception is that people do not like to report cash,” Minor said. “That money still goes to your bank account, and the IRS still gets it because whatever the third-party company is has to report it.”
Minor also drew an important distinction that many app users overlook. Not every digital payment is taxable. Splitting a dinner bill or reimbursing a friend through the “friends and family” option on Venmo does not count as income because you didn’t earn it. But the moment a transaction is marked as a business or service payment, it is reportable, trackable, and owed to the IRS.
She also stressed the importance of separating business and personal finances immediately.
“You never want to commingle funds. Have your business at one bank, your personal at another. If you need to pull from your business account for personal use, transfer it first and document it properly,” Minor said. “Because when an audit comes, they want to see everything, and every line that doesn’t make sense is a problem.”
Michelle Levi McDaniel, President and CEO of Elite Image Tax & Notary Service in Houston, says many gig workers are also missing out on significant tax benefits simply because they are not structured properly as businesses.
“A lot of people in the gig economy work under their Social Security number, which means that income is taxable to them personally,” she said. “If you get a DBA, a ‘Doing Business As’ certificate, and an EIN number from the IRS, you become a sole proprietor, and you can start writing off your expenses.”
A DBA, or assumed name certificate, can be obtained at most Texas county offices for as little as $25 and is valid for ten years. With that structure in place, eligible deductions can include supplies, marketing, mileage, utilities, a dedicated home office, and even uniforms, all expenses that reduce taxable income.
Mileage, in particular, is one of the most commonly missed deductions and one of the most scrutinized. Minor recommends an app called Mile IQ, which automatically tracks every trip and generates a year-end mileage summary, the kind of documentation the IRS demands in an audit.
“When that audit comes, they’ll ask you to prove your mileage, and whatever you put on there that you cannot prove, they will take off,” Minor said. “And if they take it off, that means you’re going to end up owing them later.”
Both experts also flagged Schedule C, the IRS form used by sole proprietors to report business income and losses, as a major audit trigger. McDaniel noted the IRS red-flag returns where a business shows a loss every single year.
“Typically, you get two years of a new startup business to be at a loss,” McDaniel said. “But when you’re at year five or six and still in the same business, that’s an indicator.”
For side hustlers who haven’t tracked a single expense, experts say it is not too late. Go back through bank statements and payment app histories month by month. Create a simple spreadsheet, 12 tabs for 12 months, logging every dollar earned and every expense paid. If you filed incorrectly in a prior year, IRS Form 1040-X allows you to submit an amended return.
For the first time, self-employed workers who receive tips may be able to deduct up to $10,000 to $12,500 from their taxable income under new provisions from the One Big Beautiful Bill Act. Minor confirmed the deduction applies to self-employment income, a significant benefit for Houston’s service-based workers that many have yet to discover.
“You have a business, not just a side hustle,” Minor said. “Run it like one.”
Free tax help is available across Houston through the IRS Volunteer Income Tax Assistance (VITA) program and the AARP Tax-Aide program for qualifying individuals.
For more information, visit irs.gov/vita.
