Do You Need a Separate Checking Account for Your Side Hustle?

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It’s common for people to seek additional income outside of their full-time job. Many times, that’s through part-time work as a contractor.

Do you need to separate your income and your transactions for your side hustle into a different bank account? That’s what a listener of the Clark Howard Podcast recently asked.

Do Contractors Need a Separate Checking Account?

How do I handle my finances if I’ve got a part-time job aside from my full-time employment?

That’s what a Clark listener wondered on the Jan. 3 episode of the podcast.

David in Kentucky asked: “My wife is going to be doing some part-time work as a contract employee. Does she need to start a separate business checking account? She has a full-time job as well, so this is just on the side.”

The only thing that the IRS requires for 1099 work is that you pay appropriate taxes, as Clark explains.

“This is what we call gig work. Having a separate checking account? Not necessary,” Clark says. “Having good records of expenses that she has for the business? Essential.”

Along those lines, Clark suggests dedicating a single credit card to the contract work. “Any time she’s buying supplies, [paying for] training, whatever, she’ll be able to treat those as direct expenses against income and it will be a dollar-for-dollar offset that reduces tax liability.”

Tax Requirements for 1099 Workers

It’s important to note that there’s a self-employment tax. It’s 15.3% in 2023. That takes care of your Social Security and Medicare requirements. So David’s wife needs to keep immaculate records of her income and expenses for her side hustle.

She can keep those records via pen and paper, an Excel document or rudimentary, affordable small-business software such as QuickBooks.

As far as the self-employment tax, Clark has a suggestion.


“She’s got to budget for that. And the best way to do that is to do extra withholding from payroll at her current [full-time] job,” Clark says. “And then she won’t have to do quarterly tax filings to stay on the good side of the IRS.”

Of course, it’s a great idea to consult with a CPA or tax professional to make sure you’re submitting a tax return that complies with IRS rules.

Final Thoughts

You don’t need a separate checking account simply because you’re working a side gig.

You need to keep good records of your income and expenses. As you’ll have some different tax requirements for your 1099 job than you will as a full-time employee, including self-employment tax.