Tim’s Tax News on the Tenth – January 2023

To respond to a changing market – the emergence of a gig economy—also called sharing economy or access economy—is activity where people earn income by providing on-demand work, services, or goods. Often, it is through a digital platform like an app or website. The IRS has updated its website and created new publications for gig workers.

What do driving for a ride-sharing company, renting out a room through a rental service, and working for a company that outsources errands and tasks have in common? These are all examples of the gig economy. Just like any other office job, money earned through the gig economy is taxable.

If you are a gig economy worker, it is your responsibility to keep track of the money you make and report it on your tax return just like any other taxpayer must do at tax time. This means if you receive income from a gig economy activity, it is generally taxable even if you do not receive a Form 1099-MISC, Form 1099-K, W-2, or other income statement. Your business expenses should be deductible, depending on tax limits and other rules.

If you earn a paycheck as a gig economy employee, your employer usually withholds tax from your pay to help cover taxes you owe. If you are a gig economy worker who is not considered an employee, then you have two ways to help cover your tax liability: Fill out and submit a new Form W-4 for other jobs where you work as an employee or make quarterly estimated tax payments to help pay your taxes throughout the year, including self-employment tax.

The IRS requires you to keep adequate proof of income and expenses. Some gig companies will track some of this information for you and send you a W-2, 1099-MISC, or 1099-K at the end of the year. Even if they do not, it is important that you keep track of all your income and expenses to report on your tax return. As the gig economy grows, so will the IRS’ audits in this area.

If you would like more details, please do not hesitate to call our office. Our office has been successful in helping taxpayers with IRS and IDOR collection problems for over 30 years. If you have a tax or debt problem, please contact me at 847-705-9698 or thughes@lavellelaw.com and find out how we can help you.

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