Workers in the gig economy, also referred to as the “sharing economy,” “on-demand economy” and “access economy,” are typically considered independent contractors. If you earn money driving for Lyft, picking up groceries through Instacart, delivering food for Grubhub or renting out your property for Airbnb, for example, you will need to report this income to the IRS.
As an independent contractor, you owe taxes not only on your income but as an employment entity, as well. In other words, the payroll taxes an employer would pay are paid by you as self-employment taxes. Moreover, you will generally be expected to pay quarterly estimated taxes instead of paying your full tax bill on April 15.
The IRS has been prioritizing gig workers, according to Accounting Today. The agency would like you to know that you owe income taxes on your gig economy income even if you don’t receive a 1099 form from the company you work for. You also owe taxes regardless of whether you were paid in cash, goods, property or virtual currency.
As part of its effort to prioritize taxes from the gig economy, the IRS has just debuted a new website, the Gig Economy Tax Center. There, both gig workers and digital platforms can manage their tax obligations.
Tax information and tips, just for the gig economy
The center offers workers information on keeping appropriate records, paying estimated taxes, deducting business expenses and filing your tax return, along with special rules for reporting rentals of vacation properties.
For digital platforms and other businesses that facilitate gig work, the center offers information about proper worker classification, reporting payments you make to gig workers, filing your taxes and even helping gig workers meet their tax obligations.
With the IRS focusing on gig workers, now might be the time to amend previous tax returns where you failed to include earnings from this work. Amending your return can prevent an expensive tax bill later, with penalties and interest.
If you are unsure about how to report income from a gig economy job, contact an experienced tax attorney.