First, get organized.

Your life will be a lot easier during tax season if you’ve already been keeping tabs on your side gig earnings. A simple spreadsheet that lists out each client you’ve worked for, along with how much you’ve earned from each, will do the trick. Creating another tab for business expenses isn’t a bad idea, either. (We’ll dig into expenses shortly.)

Why do all this? When you have a regular W-2 job, certain things are automatically taken from your paycheck before it hits your checking account. Think: federal and state taxes, Medicare, Social Security and the like. This isn’t the case for side gig money. In other words, the IRS hasn’t taken its cut yet.

How much should I pay?

The answer here is that it really all depends. Let’s back up and first look at what counts as income. Any work you were paid for—whether through cash, a paper check, direct deposit, PayPal or anything in between—is technically considered income in the eyes of the IRS. That means you have to pay taxes on it.

While there are rumors floating around that you don’t really have to report your earnings if they’re below a certain threshold, the IRS sees things differently and plainly requires that we pay taxes on all income. Otherwise, you’ll find yourself in some pretty hot water if you end up being audited.

Assuming everything is on the up and up, there isn’t a simple formula to determine how much you’ll actually pay in taxes. This is because there are a lot of moving parts at play that directly impact your tax liability. Topping the list are tax deductions and tax credits. Both have the power to reduce how much you owe.

  • Tax deductions are expenses you can write off to effectively reduce how much of your earnings are subject to income taxes. The latest round of tax reforms resulted in some significant changes here, but there are still plenty of legitimate ways to decrease your taxable income. For example, you may be able to deduct up to $2,500 of student loan interest if you meet certain income requirements.

  • Tax credits, on the other hand, do not affect your taxable income. Instead, they shave off an actual dollar amount from your tax bill. If, for example, you end up owing the IRS $1,500 but qualify for a $500 credit, your liability will go down to $1,000. The Earned Income Tax Credit and Child Tax Credit, for instance, could save you thousands.

Predicting your tax bill ahead of time is no easy task. Simplify the process by setting aside a portion of every side gig check you receive. Earmark it for taxes and put the rest toward your regular budget. How much you should save really depends on a number of factors, like whether or not you live somewhere that levies state tax on top of federal taxes. Consult a tax pro to figure out how much you should reasonably set aside for Uncle Sam.

Hang onto your receipts.

Some business-related expenses may be tax-deductible if they’re considered ordinary and necessary for your work. Supplies, business trips, mileage to and from a side gig, subscriptions to trade organizations—your accountant may give you the green light to deduct these items from your taxable income.

Again, unless you’re a tax professional, determining what counts and what doesn’t can get confusing pretty quickly. Some tax software helps make it a little easier. But it doesn’t hurt to consult an expert to be sure.

How do I make my tax payments?

Freelancers are actually required to make estimated quarterly tax payments to the IRS throughout the year. Doing so is easy thanks to the internet. You may be tempted to simply make one big payment when you file your tax return, but think hard before going this route. That could result in a penalty from the IRS.

Paying quarterly taxes comes with the territory when you’re earning side gig money. If you neglect to keep up with your payments or fail to report all your income when filing your tax return, you could be hit with a steep penalty—up to 20 percent of your underpayment, to be precise.

Sorting out your taxes is never any fun. And throwing side gig money into the mix only complicates things. But keeping accurate records and getting in the habit of routinely setting aside money for quarterly tax payments will make things a whole lot easier come tax season.

This article contains the current opinions of the author, but not necessarily those of Acorns. Such opinions are subject to change without notice. This article has been distributed for educational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. Acorns does not provide legal or tax advice. Please consult your tax and/or legal counsel for specific tax or legal questions and concerns.