Do the (side) hustle

Doing another job off the side of your desk—widely known as the side hustle—is a great way to make a bit of extra cash, or even start a new business. Be warned: it doesn’t come without risks.

To make money by hustling on the side doesn’t come with the same lewd connotations it once did, even if it still faces considerable (albeit less moralistic) scrutiny. In fact, “side hustling” has quickly become the foundation of our gig economy—including everything from writing to chauffeuring and house-cleaning to hoteling. Facilitated by a multitude of on-demand apps and sites—including AirBnB, Uber, TaskRabbit, Doordash, Postmates, Fiverr, and more—the number of gig-economy participants has increased 27 per cent over the last two decades.

While a side hustle can be a quick means to some extra cash, it can also represent a more substantial attempt at entrepreneurship. Lior Zehtser (CPA, CA) started ConnectCPA by way of a side hustle, and now serves other entrepreneurs and technology mavens with his automation-focused, cloud-based accountancy firm. CPA Canada talked to Zehtser to better understand what makes a side hustler tick—and how she or he can keep the hustle going.

Why did you start a side hustle?

I had a full-time job and was doing tax returns for family, friends and other clients on the side, but my work environment was terrible. Always someone over your shoulder, watching your every move. My side-hustle client base was growing, so I decided to try going out on my own. The decision took a long time, though—your parents tell you “no,” your friends tell you “yes”—but I wanted the autonomy, flexibility and a more relaxed work environment. I did it—and eventually it led to ConnectCPA.

What’s your first piece of advice to a side hustler?

The first important thing is to have a tracking mechanism, like an online accounting system. Even if it’s simple invoicing software and a spreadsheet for expenses, keep track so you know where you’re at: whether you’re making money and if you owe tax. There’s lots of free software online. You don’t need full-on accounting software at first; you can graduate to something bigger and better over time.

How can you tell if your side hustle is a viable business?

One sign is if your cash balance is increasing month to month. Second, if you use a tracking mechanism, you’ll be able to run reports and see what your income and expenses are to determine if you’re viable. Third is demand—if you’re getting requests for your services, making sales, etc. It’s a combination of all three.

What are the tax implications?

When you work a full-time job, taxes are withheld at source. Side hustlers aren’t used to saving a percentage of their own income for tax; it isn’t instinctual yet. It’s hard to say what it is—you have to reinvest in the business and it depends on your tax bracket—but you should save something, period.

The second tax implication is GST/HST. The CRA mandates that when you have sales of $30,000 in a year (although the quarters matter, too), you must register and charge for it. If CRA determines you should have been registered, they’ll reverse engineer how much GST/HST you should have been charging and you’ll owe it. But registering can also be a benefit: you can claim back any GST/HST you paid on expenses as a refund.

Why should a side hustler incorporate?

There are two reasons: liability and tax deferral. If you’re in an industry that’s risky to the customer—meaning the customer might sue you, like security or even accounting—you need to be protected. If you aren’t incorporated and don’t have a good insurance policy, someone can sue you for your personal assets. Also, income within a corporation is taxed at a lower rate, so you want to leave as much within the corporation as possible. It’s only taxed as personal income when you take it out.

Any final advice?

Don’t neglect your finances for too long. People come to us all the time, a year or two in, with just bank statements. They don’t even know if they made money; they may owe tax, and catch-ups are labour-intensive and expensive. You don’t want all your profits going to interest, penalties and fees.

KEEP THE CONVERSATION GOING

Have you ever done the side hustle? Do you have any advice or stories to share?

Let us know by posting a comment below or on our Facebook, LinkedIn, Twitter, or Instagram.

Disclaimer

The views and opinions expressed in this article are those of the author and do not necessarily reflect that of CPA Canada.

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