Candace J. Dixon
The gig economy allows people to earn income by using technology to arrange transactions. This could include performing rideshare services or food deliveries, renting out property, selling goods online, or doing freelance work. Customers and providers of goods or services are often brought together through a digital platform on an app or website.
Here are some things gig workers should remember:
All income must be reported, even if the income is:
From part-time, temporary, or side work
Not reported on a Form 1099-K, 1099-NEC, 1099-MISC, W-2, or other information return.
Paid in the form of cash, property, goods, or virtual currency
Gig economy workers may also be required to make quarterly estimated income tax payments and pay self-employment tax.
While providing gig economy services, it is important that the worker is correctly classified.
It is critical that business owners correctly determine whether the individuals providing services are employees or independent contractors. If you classify an employee as an independent contractor and with no reasonable basis for doing so, you may be held liable for employment taxes for that worker.
Workers can use the IRS worker classification page to determine how you are being classified.
Independent contractors may be able to deduct business expenses, depending on tax limits and rules. It is important to keep records of these business expenses.
It's important for gig economy workers to pay the correct amount of taxes throughout the year to avoid owing when they file.
An employer typically withholds income taxes from their employees' pay to help cover income taxes their employees owe.
Gig economy workers, who are not considered employees, have two ways to cover their income taxes:
If they have another job as an employee, gig workers can submit a new From W-4 to their employer to have more income taxes withheld from their paycheck.
They can make quarterly estimated tax payments to help pay their income taxes throughout the year, including self-employment tax.
Additional Resources:
The Gig Economy Tax Center Publication 5369, Gig economy and your taxes: things to know Publication 1779, Independent Contractor or Employee Is My Residential Rental Income Taxable and/or Are My Expenses Deductible?