"If your side job is ¥200,000 or less, you don't have to file a final tax return." This is half true and half false. The ¥200,000 rule is a special rule for income tax only; for residence tax, a declaration is required from the very first yen. On top of that, "people who file a final tax return for another reason" cannot use this rule. This article organizes, in the order side-job workers tend to stumble, the exact meaning of the ¥200,000 rule, the latest criteria for classifying income (business income or miscellaneous income), how residence tax works so your employer doesn't find out, and the risks of not filing.
The exact meaning of the "¥200,000 rule"
If an employee who receives salary from one place has total income other than salary and retirement (such as a side job) of ¥200,000 or less for the year, no income tax final return is required[NTA No.1900]. However, this is a treatment for income tax only, and there is no ¥200,000 special rule for residence tax. If you have even ¥1 of side-job income, in principle a residence tax declaration to your municipality is required.
What you judge is income, not revenue. Even if your side-job revenue is ¥300,000, if expenses are ¥150,000 then income is ¥150,000, and no income tax return is required (a residence tax declaration is still required). Conversely, if revenue is ¥180,000 with zero expenses, income is ¥180,000.
An easily-missed exception: people who "do" file a return must include everything, even ¥200,000 or less
The ¥200,000 rule is a special rule that says "you don't have to file a final return." Therefore, people who file a final return in the first place for reasons such as the medical expense deduction, Furusato Nozei (when the one-stop system is not used), the first year of the mortgage loan credit, or salary from two places must include side-job income of ¥200,000 or less in their filing. You cannot say "since I'm doing it just for the medical expense deduction, I'll leave out the side-job portion."
Correctly classifying the "type" of side-job income
Writing, affiliate marketing, video, spot gigs
A side job that is small in scale and where you keep no books. You cannot use the blue return, and losses cannot be offset against salary and other income.
A side job run continuously, repeatedly, and independently at scale
There is a real substance of keeping books and running it as a business. You can use the blue-return special deduction and loss offsetting.
A second part-time job
Something paid as salary from an employer. If you have salary from two or more places, a final return tends to become necessary.
With the 2022 revision of the Basic Circular on the Income Tax Act, whether income from a business activity is business income or business-type miscellaneous income now turns mainly on whether you prepare and retain books and records. If books are retained, it is generally treated as business income; if not, as business-type miscellaneous income (however, even with books, it may be judged miscellaneous income where there is no profit-seeking nature, or where income is extremely small and lacks continuity). If you want to receive the merits of the blue return as business income, assume that keeping records by double-entry bookkeeping and retaining the books is the premise.
Concrete examples: judging whether filing is required
→ An income tax final return is not required. However, a residence tax declaration is required.
How your employer finds out about a side job, and how residence tax works
The main route by which a side job reaches your employer is a change in the residence tax amount. When you file a final return, residence tax is calculated on income including the side job, and because the notified amount of "special collection (withholding from salary)" at your workplace rises, the accounting staff may notice.
In the "Matters concerning residence tax" section of the second table of the final return form, if you choose "pay it yourself" as the collection method for residence tax on income other than salary and public pensions, you can pay the side-job portion of residence tax yourself, and it is not added on top of the amount withheld at your workplace.
This method can be used when the side job is business income, miscellaneous income, or the like. If the side job is salary such as a part-time job, because special collection is the principle for salary, it may not be possible to separate it, and it also depends on the municipality's practice[MIC]. If you want to be sure it is separated, please confirm in advance with the municipality where you live. Note also that side jobs may be prohibited or require permission under your work rules, which should be checked separately.
Summary of whether a final return is required
| Case | Income tax final return | Residence tax declaration |
|---|---|---|
| Employee, side-job income ¥200,000 or less (no other reason to file) | Not required | Required (to the municipality) |
| Employee, side-job income ¥200,000 or less + filing for the medical expense deduction, etc. | Required (include the side job) | Reflected via the final return |
| Employee, side-job income over ¥200,000 | Required | Reflected via the final return |
| Salary from two or more places | Tends to be required | Reflected via the final return |
| Sole proprietor (filing regardless of amount is the basic rule) | Required | Reflected via the final return |
The risks of not filing or under-reporting
If you leave it alone thinking "they won't find out," penalties are later added on top of the base tax. For income tax there can be the additional tax for non-filing and delinquent tax, and for residence tax as well a delinquency charge (up to 14.6% per year) can arise. It is not rare for under-reporting to come to light because a client submitted a payment record, or because you were identified from a platform's payment data. Correct filing within the deadline (in principle February 16 to March 15) is the lowest-cost option.
FAQ
If side-job income is ¥200,000 or less, is it really okay to do nothing?
No. Even if no income tax final return is needed, a residence tax declaration is in principle required. Also, if you file a final return for something like the medical expense deduction, you include that ¥200,000-or-less side-job income in the filing too.
Is income from flea-market apps and point-earning activities also covered?
Profit from selling movable property for daily life (clothing, furniture, etc.) is in principle non-taxable, but continuous selling for resale purposes, and points and rewards, can be taxable. Check whether it exceeds ¥200,000 on a profit (income) basis.
How do business income and miscellaneous income differ?
The main criterion is whether you prepare and retain books and records. If you keep books and continue it as a business, you can use the blue return as business income (up to ¥650,000 deduction, loss offsetting). Without books, it is business-type miscellaneous income.
I want to pay the tax on my side job without my employer finding out.
There is a method of choosing "pay it yourself (ordinary collection)" for residence tax on the second table of the final return form. However, if the side job is salary it may not be possible to separate it, and it also depends on the municipality's practice, so confirming in advance is safest.
Summary
Reference links (sources)
This article is prepared based on materials from the following public bodies (neutral, primary sources). Because rules may be revised, please check the latest content before filing.
- National Tax Agency No.1900 Salary earners who must file a final return (in Japanese)
- National Tax Agency No.1500 Miscellaneous income (in Japanese)
- National Tax Agency No.1350 How business income is taxed (business income) (in Japanese)
- National Tax Agency No.2070 The blue return system (in Japanese)
- Ministry of Internal Affairs and Communications — Individual residence tax (overview of the system) (in Japanese)
* This article is general information, not tax advice. For judging the income category or individual procedures, please confirm with the tax office, the municipality where you live, or a tax accountant.