Even the Odds: It's hard to get ahead. Sometimes you need a side business. Most independent workers don't have just one business. Hairdressers also own nail salons, photographers own frame shops and journalists may offer resumé building services. The possibilities are endless. But you have to watch out. No matter how many businesses you operate, the IRS needs to know how much money you're making from each. You have to watch your back and make sure you report everything correctly.
Grouping Together: If it's easier, combine your businesses into one. Instead of having a separate nail and hair salon, have one salon that offers both or combine your web design and photography business. This keeps you from having to file two Schedule Cs.
The Catch: Your businesses need to be related. You cannot combine your dog walking business with your computer repair gig. But it makes sense to combine your essay writing and resume writing services. Be creative, but don't try to stretch your limits too far.
Hobby vs. Business: The IRS can classify your venture two ways. They may see one business as a “hobby,” which means less tax deductions for you! The IRS can classify your venture as a “hobby” if you lose money for 2 years consecutively or if you cannot provide proof that you are operating with business sense. If your business is classified as a hobby, you can only receive deductions up to the amount of money you've earned with the hobby.
Word of Caution: If you received tax deductions on your work tools for two years before your business was classified as a hobby, you'll owe that money back! And if you don't pay it back, you'll end up in debt with the IRS. And you may already know how that goes. You risk Tax Levies, Liens, and Seizures. So it's important to do your research and classify your businesses correctly.