1. Introduction
In recent years, many companies have begun allowing employees to take on side jobs, significantly expanding work style options. While side jobs offer benefits such as utilizing personal skills and diversifying income sources, starting a side job without sufficient understanding of taxation can lead to unexpected tax risks.
If side job income is not properly reported, additional taxes and penalties may be imposed, and in some cases, this may even affect one’s social credibility.
This article explains common tax risks associated with side jobs and practical countermeasures to address them.
2. Major Tax Risks Commonly Associated with Side Jobs
(1) Risk of Additional Tax Assessments Due to Failure to File
Income earned from side jobs—such as part-time work, contract-based services, freelance work, or online sales—is generally subject to taxation and may require filing a tax return. However, some individuals fail to file, assuming the amount is too small or wishing to avoid their employer becoming aware of the side job.
Failure to file a required tax return may result in additional tax assessments, late payment interest, and in some cases, substantial penalties. These consequences can pose not only financial burdens but also reputational risks.
(2) Risk of Side Jobs Being Disclosed to Employers Through Resident Tax
When a tax return is filed including side job income, the information is reflected in the calculation of resident tax. If resident tax is collected through special collection (withholding from salary), an increase in the resident tax amount notified to the employer may alert them to the existence of a side job.
It is important to confirm company policies regarding side jobs in advance.
(3) Risk of Expense Deductions Being Disallowed
Expenses that are directly related to a side job may be deducted as necessary expenses. However, including personal expenses as business expenses may result in disallowance during a tax audit. In particular, excessive or unreasonable expense claims may be questioned regardless of intent.
3. Basic Measures to Avoid Tax Risks
(1) File Accurate and Timely Tax Returns
Even salaried employees are generally required to file a tax return if their side job income (income after deducting expenses) exceeds 200,000 yen per year. Properly organizing income categories and deductible expenses and filing within the deadline is the most fundamental and important countermeasure.
(2) Maintain Daily Records
It is essential to keep daily records of income and expenses related to side jobs and to retain receipts and invoices. Proper recordkeeping significantly reduces the burden at the time of filing a side job tax return.
4. Reducing Risks by Consulting Professionals
When side job activities are complex or expense classifications are unclear, consulting a tax accountant or other professional can help ensure appropriate handling while minimizing risks. Professional expertise is particularly important for side jobs involving overseas transactions or crypto-assets. Early consultation can help prevent future issues.
5. Conclusion
Side jobs offer significant opportunities for supplemental income and career development. However, mishandling tax obligations can quickly negate these benefits. By ensuring accurate tax filing and implementing appropriate preventive measures, individuals can engage in side jobs with confidence.
Please note that this article is intended to provide a general overview and does not constitute professional advice. Readers are advised not to make decisions or take action based solely on this information without consulting a qualified professional.
If you have any questions, please feel free to contact us via the URL below.
If you have any questions, please feel free to contact us via the URL below.
References
National Tax Agency of Japan, “Individuals Required to File a Tax Return”
(Accessed January 23, 2026)
National Tax Agency of Japan, “Classification of Income Related to Side Jobs”
https://www.nta.go.jp/taxes/shiraberu/taxanswer/shotoku/1300.htm
(Accessed January 23, 2026)
https://www.nta.go.jp/taxes/shiraberu/taxanswer/shotoku/1300.htm
(Accessed January 23, 2026)
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