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Side business bookkeeping: income, expenses and CPA records
A side business needs records that explain what came in, what was spent and why. Start with the activity itself so your CPA can evaluate its tax treatment from a complete record.
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General information, not legal or tax advice.
Record receipts even when no platform form arrives
The IRS says gig income must be reported even when earned through temporary, part-time or side work and even when no information return reports it. Payment may be cash, property, goods or virtual currency. Keep a sales log that connects the work performed with the value received rather than waiting for a platform statement to reconstruct the activity.
Sources: IRS, Gig economy tax center (page last updated 09-Jul-2026)
Document the intention and conduct of the activity
IRS guidance distinguishes a hobby pursued for enjoyment without a profit intention from a business operated for profit. Its factors include complete and accurate books, businesslike conduct, effort, reliance on income, changes to improve profitability and profit history. No single factor outweighs the others. Keep evidence of actual decisions for the CPA’s review instead of treating a separate account as a complete answer.
Sources: IRS Tax Tip 2022-57
Bring net earnings into the self-employment discussion
The IRS states a 15.3% self-employment tax rate, made up of 12.4% Social Security and 2.9% Medicare. Net self-employment earnings of $400 or more trigger Schedule SE and self-employment tax. Wage income and other circumstances affect the calculation, so provide the CPA with both employment and side-business records rather than applying the headline rate blindly.
Sources: IRS, Self-employment tax (Social Security and Medicare taxes)
Identify owner transfers and business purchases
As a practical routine, separate side-business receipts and spending from personal transactions. Label money contributed by the owner, transfers between accounts and customer payments so deposits do not become unexplained sales. Save invoices and receipts with a note about the business purpose, and reconcile platform payouts with the underlying activity.
Prepare a usable package for the return preparer
The IRS permits an employer-equivalent portion of self-employment tax to be deducted when calculating adjusted gross income. Your CPA should calculate that adjustment and determine the activity’s treatment. Provide reconciled income and expenses, unresolved personal-use questions and the records supporting profit intent. Tidwell’s role is maintaining the books behind that review.
Sources: IRS, Self-employment tax (Social Security and Medicare taxes)
Sources: record receipts even when no platform form arrives
Keep personal spending separate
Give your side business a consistent bookkeeping routine
Tidwell helps organize receipts, reconcile accounts and prepare financial records for your CPA’s tax work.