Navigating taxes in the gig economy

Posted on Wednesday, February 26, 2020 by Nicole Fracasso

People often pick up part-time work outside of typical nine to five hours. This is usually referred to as a side job, a way to make some extra money. And it’s part of the gig economy, also known as sharing economy or access economy.

The IRS defines gig economy as “activity where people earn income providing on-demand work, services or goods.” While usually done through a digital platform such as an app or website, the IRS has stated that income generated from these services still needs to be reported on tax returns.

These services include driving a car for booked rides such as Uber or Lyft, renting out property, selling goods online and much more.

Whether you need to file taxes for your own gig work, or if you’re helping a client, it’s important to know how to navigate taxes in the gig economy.

“You must file a tax return if you have net earnings from self-employment of $400 or more from gig work, even if it’s a side job, part-time or temporary,” writes the IRS.

To help gig workers manager their taxes, the IRS recommends the following:

  • Keep records and receipts of expenses and income.
  • Pay estimated taxes four times a year. The IRS offers forms to determine the estimates.
  • Get ready to file by collecting income forms. Make sure to include all income and subtract your expenses.
  • File your tax return.

Since this type of work is often done on a digital platform, tax filers also need to understand how to manage these platforms.

“Understand your tax obligation if you operate a digital platform, marketplace or business in the gig economy.”

For example, one must classify workers, report payments, file and pay, and help workers meet their tax responsibilities.

For more information on how to navigate taxes in the gig economy,  click here to view what the IRS wants everyone to know.

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