Kevin Malone may have been slightly overshadowed by Dwight, Jim, Pam, and Michael Scott, but The Office co-worker shared many pearls of wisdom during the NBC sitcom’s nine year stretch. Now the actor who plays Malone, Brian Baumgartner, is the one sharing words of wisdom through Cameo, a company that allows celebrities to send personalized video messages to fans. Baumgartner is set to gross over $1 million this year, the most revenue on the platform in 2020, according to CEO Steven Galanis. While Baumgartner’s side hustle may be unique and his ancillary income high, millions of others have also turned to side gigs to supplement their income and cover expenses during the coronavirus pandemic. Regardless of whether your side hustle is grossing $1 million or $10,000, it is crucial to plan ahead to ensure that aren’t left with tax headaches during filing season.
“I Just Want To Sit On The Beach And Eat Hot Dogs. That’s All I’ve Ever Wanted”
While his character on the The Office dreamed of relaxing and eating during the show’s iconic “Beach Day” episode, Baumgartner has assiduously harnessed the character’s persona into big bucks. Cameo, which was founded in 2016, allows fans to pay for personalized video messages from celebrities. Galanis revealed that Baumgartner had netted the most revenue for 2020 during an interview with Kara Swisher on the New York Times podcast, Sway. “The person that did the most in revenue this year is Brian Baumgartner who is Kevin from The Office,” Galanis told Swisher. “He’ll do over $1 million this year in bookings.”
Baumgartner charges $195 per Cameo, which would mean the comedian has recorded over 5,128 videos this year. That’s far from a relaxing day at the beach and would equate to doing 14 videos every day of the year, on average. Galanis credit’s Baumgartner’s “persona” with his success on the platform, as evidenced by a 5 star rating and 1889 reviews. “He really takes a lot of pride in his craftsmanship of the videos,” Galanis explained. “And I do think the quality of the Cameo is something that is really important to people. And he just is somebody that really takes it seriously and does a great job.”
Cameo has seen strong overall growth since the start of the coronavirus pandemic. The company saw its sales double over a three-week period starting in mid-March, Galanis said during an interview with Refinery29.
More Americans Pursuing Side Hustles
The Office star and other celebrities may not be relying on their Cameo side hustles for everyday income, but millions of Americans have also turned to freelancing since the pandemic started for that very reasons. While the trend towards freelancing has been ongoing for years, two million more Americans reported freelancing in 2020 compared to 2019, according to a study by Upwork. This figure accounts for 28 percent of freelancers in Upwork’s survey who said they paused their side gig since the onset of the coronavirus pandemic and 34 percent of those who started doing freelance work as of March, 2020 when Covid-19 started ravaging the country.
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Adam Ozimek, Upwork’s chief economist, noted that the economic uncertainty in March and April coupled with large-scale lockdowns may have spurred many individuals to look at side hustles for the first time. Similarly, with more ambiguity and an inability to forecast demand accurately, many business have also turned to freelancers who could be hired on a more temporary basis.
For example, the unemployment rate spiked in April of 2020 to 14.2 percent when the pandemic ravaged the U.S. and forced parts of the country into lockdown. Sixty-four percent of those 24 and older who had lost a job or saw their work hours cut had either found or planned to seek a side hustle, according to a TD Ameritrade survey conducted between April 24 and May. Another survey, conducted by Self.inc in mid-April, showed that 54 percent of all adults were planning a side gig. “There has been a surge of this in the past few months that is definitely attributable to the number of people being laid off,” Sara Sutton, CEO of FlexJobs, told USA Today.
While the unemployment rate has dropped since its April peak, the 6.7 percent rate in November is still almost double pre-pandemic levels. Moreover, with Covid-19 surging across the country, swaths of the economy remain closed and many unemployed individuals aren’t seeking traditional jobs in part because of lingering fears of catching coronavirus. That has left many Americans struggling financially and need additional income. This has been exacerbated by enhanced federal unemployment benefits, as well as the Lost Wages Assistance program, that have all but dried up and will continue as other programs are set to expire before the end of the year; and let’s not even get started about the inability of our dysfunctional Congress to pass another stimulus package.
As a result, many have turned to side-hustles to make ends meet, especially if they are able to do so remotely and safely. As Forbes contributor Jennifer Barrett reported, “for some workers, the extra income is essential, helping to cover basic expenses,” with 27 percent of respondents in a DollarSprout May survey relying on side gig income to cover monthly bills.
Tax Tips For Side Hustles
Freelancing has its advantages, but also requires individuals to be more diligent about tracking their income and expenses as well as ensuring they are complying with tax law. Here are a few tips to avoid common freelancer pitfalls and squeeze more benefits from your side hustle income.
- Track expenses and keep receipts: One of the upsides of freelancing is that you are allowed to deduct certain expenses from the taxable income you earn, which results in a lower tax liability at the end of the year. These expenses may include office supplies, hardware or software, advertising or web-related expenses, among other expenses. It behooves any freelancers to review the guidelines on what expenses are deductible and implement a system to track expenses. This should include keeping receipts and records, for things like car mileage, in case of an audit.
- Declare your income: This may seem obvious, but you have to declare income that you earned, even if it from a side hustle and regardless of the amount. If you earn more $600 from one payor, then that payor is required to issue you a tax form (usually a 1099-MISC) and report the amount to the IRS too. What if the amount is less than $600? As Forbes senior contributor Kelly Phillips Erb notes, “income is income. . . and you have to report all of your income, from whatever source, on your tax return unless it’s otherwise excluded.”
- Put money aside for taxes: When you are employed by a company or organization, you may be accustomed to the employer holding back some of your salary each paycheck and remitting it to the government. However, when you make money from a freelance gig, taxes aren’t withheld from the amount you are paid. Therefore, it is incumbent on you to put part of the earned income aside to account for taxes you may owe Uncle Sam at the end of the year. If you don’t do this, you could be surprised by a huge tax bill. The amount you need to put away will vary depending on many factors, including how many deductible expenses you have, but 25 percent to 30 percent is a good general rule of thumb. Ideally, put this money into a separate bank account that is out of sight or simply pay it to the government right away.
- Don’t forget to pay estimated quarterly taxes: The U.S. tax system a “pay-as-you-go” system, which is why companies withhold money from each paycheck and remit it to the government. Similarly, if you are freelancing and expect to owe more than $1,000 in taxes, the IRS wants to collect throughout the year, not just in one lump sum when you file your taxes. Specifically, it requires you to pay estimated taxes on a quarterly basis. These payments are due in April, June, September, and January and it’s crucial for freelancers to plan for and make these payments. Individuals can make tax payments more frequently than once per quarter and some may find it easier to forecast on a monthly basis.
- Determine if you need insurance: For your side hustle, it may be important to protect yourself with additional insurance coverage. Depending on your side gig, this may include property, general liability, or commercial auto insurance. For my side hustle, Acing Your Finances, which focuses on delivering financial education workshops for universities and employers, I was required to obtain general liability insurance as a prerequisite for some of my engagements. The other benefit of insurance, it’s generally a tax-deductible item for your side hustle.
- Consider funding a retirement account: Just like taxes aren’t withheld automatically for freelancers, there are also no automated plans to save for retirement. Don’t overlook this critical aspect of ensuring your long-term financial security. Contributing to a retirement account is also a terrific way to reduce your tax liability even more. There are several options including a Solo 401(k) and a SEP IRA, which are suitable for self-employed individuals and have different advantages. A SEP IRA for example, is a simple account to set up and allows you to contribute the lesser of $57,000 or up to 25 percent of your net self-employment earnings in 2020 (there are some additional requirements for small-business owners who have employees).
With the coronavirus pandemic continuing to devastate the economy, many have turned to side gigs to supplement their income and cover expenses. While side hustles can be rewarding, they are also hard work. Just look at Baumgartner’s 5,128 Cameos. With so many, Baumgartner may deserve a vacation in 2021. After all, sometimes Batman’s got to take off his cape.