What will tax reform look like? That is a major question swirling in the political air in Georgia and every other state of the nation. No one in a position of making such policy is willing to provide much in the way of clarity on the subject. They apparently want to keep their options open. Who can blame them? No matter what action follows, someone will be upset. There is one thing that analysts say law and policy makers should try to keep top of mind – the gig economy.
As we noted in a post earlier this month, nearly 70 million individuals now make some or all of their income by offering services through online outlets, but do not report it on their returns. Estimates put the amount of money that goes undeclared at nearly $215 billion.
Tax policy observers say the issue goes deeper than simply people evading taxes. They say the current tax system in the U.S. is so out of date that it is incapable of serving the needs created by the gig economy. Further, they predict the challenges will only become greater as the shift toward more self-employed small businesses continues in coming years.
How the current system hurts gig workers
One of the greatest difficulties facing those who contract the providing of services through online platforms is that the code wasn’t written for them. The last major overhaul of the tax code happened in 1986, before the internet was active. Nascent e-commerce entities such as eBay and Amazon didn’t come until the late 1990s, and it was another 20 years before smartphones put gig jobs within the reach of nearly everyone.
Meanwhile, ambiguous language left the door open to broad variation in interpreting what rules should apply to reporting. Where questions exist, confusion reigns. And in the midst of confusion, taxpayers and collectors can lose out. Experts say a great opportunity now exists for better outcomes for workers in the on-demand economy and the IRS alike.
In coming posts, we will seek to look at some o f the specific issues the gig economy has created for those participating in it.