The First $4,800
MONEY MEETS TAX · EPISODE 01
Los Angeles · 2023
Money & Tax in this episode
Side hustle income · Starting without an LLC · Self-employment tax
Evan Park almost ignored the deposit.
It showed up on a Friday afternoon while he was sitting at his desk, half listening to a meeting that had already run twelve minutes over.
$4,800.00
The description was one word.
Consulting.
He looked at it again.
Not bad for a few weekends.
Three months earlier, Kevin, an old coworker, had called him with a problem.
Kevin had joined a small technology company that was growing faster than it knew how to manage. Projects were slipping. Work was getting duplicated. One customer seemed to take up half the company’s time, but no one could say whether the account was actually profitable.
Evan worked in corporate strategy. He liked problems like that.
At first, it was just a couple of calls after work.
Then Kevin asked if he could stop by on a Saturday.
Evan spent most of the morning asking questions, went home with a spreadsheet full of numbers, and sent Kevin a short operating plan the following week.
That was supposed to be it.
They never discussed a fee.
Evan never sent an invoice.
Apparently Kevin had decided otherwise.
Daisy was at the dining table when Evan got home, looking through fabric samples on her laptop.
He set his phone beside her.
“We made forty-eight hundred dollars today.”
She looked at the screen.
“We?”
“Kevin paid me.”
“For helping with his company?”
“Yeah.”
“I thought you were doing him a favor.”
“So did I.”
Daisy picked up the phone.
“Consulting.”
“That’s what he called it.”
“Did you call it anything?”
“No.”
She handed the phone back.
“Well, that was nice of him.”
Evan opened the refrigerator.
“Very nice.”
Daisy went back to her laptop.
A few seconds passed.
“Do we have to pay tax on it?”
Evan took out a bottle of water.
“It’s not like I have a business.”
Daisy looked over at him.
“I didn’t ask if you had a business.”
He closed the refrigerator.
“No, I know.”
Later that night, Evan opened his laptop.
He had always thought of taxes as something attached to paperwork.
His paycheck had a W-2.
His brokerage account sent tax forms.
If he sold stock, another form arrived a few months later.
This payment had none of that.
No company.
No LLC.
No invoice.
No business account.
Just $4,800 sitting in the same checking account they used for groceries and rent.
He searched:
Do I have to pay tax on consulting income if I don’t have a business?
The answer to that question was easier than he wanted it to be.
Getting paid for work did not become tax-free because he had no LLC.
And a tax form, if one eventually arrived, would only report something that had already happened.
Kevin had paid him.
That part was not especially complicated.
What Evan couldn’t tell was whether one weekend project made him self-employed.
He opened another tab.
Then another.
Ten minutes later he had learned enough to become less certain.
Some pages talked about sole proprietors.
Others talked about independent contractors.
One article told him to form an LLC immediately. Another insisted he needed an S corporation.
Evan closed that one.
He was still trying to figure out what the $4,800 was.
The next morning, Daisy found him at the table with his laptop open.
“You’re doing taxes on a Saturday?”
“I’m not doing taxes.”
She poured coffee.
“What are you doing?”
“Figuring out whether I have a business.”
Daisy sat across from him.
“Do you?”
“I don’t think so.”
“Okay.”
Evan waited.
“That’s it?”
“What do you want me to say?”
“I thought you’d have an opinion.”
“I do.”
She took a sip.
“You got paid almost five thousand dollars to do work for someone.”
“That doesn’t mean I’m starting a company.”
“I didn’t say it did.”
Evan looked back at his screen.
Daisy smiled.
“You really want this to have a yes-or-no answer.”
“It should.”
“Why?”
He didn’t answer.
There was one part of the reading Evan liked.
If the work did become a business, the tax system generally cared about profit, not just the amount that landed in his account.
He thought about what he had spent on the project.
Parking twice at Kevin’s office.
A software subscription.
Some driving.
Nothing significant, but not zero.
He opened a blank spreadsheet.
Daisy noticed.
“Of course.”
“What?”
“You made a spreadsheet.”
“I’m tracking expenses.”
“You’ve had one client.”
“That’s how tracking works.”
She went back to her coffee.
Evan created four columns.
Date.
Description.
Amount.
Notes.
He entered the software charge first.
It felt slightly excessive.
He saved the file anyway.
A few weeks passed.
Nothing happened.
Evan went to work.
Daisy went to the design firm.
They met friends for dinner, spent a weekend in San Diego, and talked again about whether they were finally ready to buy a house.
The $4,800 stopped feeling important.
It had been a nice surprise.
Probably a one-time thing.
Then, on a Tuesday afternoon, Kevin sent him a text.
A friend of mine runs a distribution company.
They’re having some of the same problems we had.
Mind if I give him your number?
Evan read it twice.
That evening, he showed Daisy.
She smiled.
“What?”
“Nothing.”
“You’re doing that thing.”
“What thing?”
“The face where you already know what you’re going to do, but you’re pretending you’re deciding.”
Evan looked at the message again.
“I’m just going to talk to him.”
“Sure.”
“That doesn’t mean anything.”
“I know.”
Evan typed his reply.
Yeah. Send him my number.
Then he put the phone down.
The Tax Behind the Story
Daisy’s question contains two different tax issues.
First, Evan generally cannot ignore the $4,800 simply because he has no LLC or because he may never receive a Form 1099. He performed services and received payment. The paperwork does not create the income.
The harder question is whether one project already means Evan is carrying on a trade or business.
For 2023, that depends on the facts, including whether the activity is pursued for profit and carried on with continuity and regularity. One isolated project can look very different from consulting work that begins producing repeat clients.
If Evan’s consulting develops into a business, qualifying expenses can reduce business income in determining net profit, and net self-employment earnings can also bring self-employment tax into the calculation.
For now, Evan has one client.
Kevin has just found him a second.
Want the tax rules behind the story?
Side Hustle Income: When Does It Become a Business?
A deeper look at Schedule C, trade-or-business standards, self-employment tax, deductible expenses, estimated taxes, and reporting income without a Form 1099.
Next Episode
Do I Need an LLC?
The second conversation turns into another project.
Evan is beginning to think he should make the work official.
He already knows what he wants to create.
He just isn’t sure what it actually does.