The last payment of the summer came in on a Tuesday night: $55 for an overnight with a very anxious corgi two blocks from my parents' house. My phone made its little ding, and I did the math in my head before I'd even put the phone down. That brought my summer total for pet sitting and dog walks to $1,420.
Then I thought about what I'd been avoiding for three months. Nobody takes taxes out of a payment app transfer. My paycheck from my billing job has federal and Illinois tax withheld every two weeks, but the money from walking a neighbor's golden retriever lands in my account whole. It feels like extra money. It isn't, at least not all of it.
How I picked 25%
I'm not a tax person. I work in medical billing, which is its own kind of confusing. So I asked a friend of my mom's who has done people's taxes for twenty years, and she walked me through the pieces over coffee at the library.
As she explained it, side income like mine gets hit two ways:
- Self-employment tax. When you work for an employer, they pay half of your Social Security and Medicare tax and you pay half. When you work for yourself, you pay both halves, which comes to 15.3%. It applies once your net self-employment earnings reach $400 for the year, and it's figured on most, not all, of your net profit.
- Regular income tax. The side money stacks on top of my salary, so it's taxed at my federal bracket, plus Illinois's flat 4.95%.
Added up roughly, that sounds like a scary number. But a few things bring it down. Half of the self-employment tax is deductible. And I can subtract real business expenses, mostly mileage driving to the Wilmette clients who aren't walking distance, and small supplies like poop bags and treats. She said for someone at my income with my small side business, putting aside about 25% of every payment would probably cover it and maybe leave a little over. I liked that a mistake in that direction would come back as a refund rather than a bill.
Where the money sits
The tax money does not live in my checking account, because I know myself. Money in my checking account gets spent on iced coffee and gas.
My emergency fund is in an online high-yield savings account earning 3.8%. That bank lets me open separate savings buckets under the same login, so I made one called "taxes, do not touch." Every time a pet-sitting payment comes in, I move 25% of it over the same day. I rounded my summer catch-up to $355, which is 25% of $1,420, and moved it all at once.
The rest of the summer money, $1,065, I rounded up to $1,100 with a little from checking and sent straight to my student loans as one lump payment. That felt fantastic. Watching the balance drop by four digits in one go is a different kind of fun than any pet-sitting gig.
What I'm doing differently from now on
I'm starting a mileage log. I didn't keep one this summer, so I'm reconstructing it from my calendar and the clients' addresses, which is annoying but doable. From now on there's a note in my phone with the date, the client and the round-trip miles, entered before I pull out of the driveway.
I'm also keeping a simple list of expenses with receipts photographed. The total is small, but it's mine, and it lowers the tax.
As for when to pay, the deadline for the third quarterly estimated payment was September 15, and it went by before I'd even started thinking about this. My mom's friend said that because my paycheck withholding already covers most of my tax, I'm probably in decent shape, but she suggested I send an estimated payment by the January deadline to cover the side money for the whole year. So that's the plan. The tax bucket grows until January, and then it goes to the government.
It's not a fun bucket to look at. But I'd much rather open my tax software in February knowing the money is already sitting there than find out I owe a few hundred dollars I spent on dinners in August. Small, boring, done.
