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IRS Tax Tips June 27, 2023
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Issue Number:? Tax Tip 2023-85
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*Info to help gig economy workers stay on top of their tax responsibilities*
The gig economy - also called sharing economy or access economy - is a popular way for people to earn income by providing on-demand work, goods or services. Some people take up gig work on a part-time basis, and for others the job is done full-time. Income from gig work ? such as driving a car for booked rides, selling goods online, renting out property or providing other on-demand work ? is taxable and must be reported as income on the worker's tax return.
*Gig work is taxable*
* Earnings from gig economy work are taxable regardless of whether an individual receives information returns. Due to reporting requirements [ [link removed] ].PDF, gig economy workers may get a Form 1099-K if their income exceeds $600.
* Earnings from gig work include payments by credit card, cash, property, goods or virtual currency.
* Gig workers may be required to make quarterly estimated tax payments [ [link removed] ].
* If gig workers are self-employed, they must pay all Social Security and Medicare taxes on their income from the gig activity.
*Proper worker classification*
It?s important that the taxpayer is correctly classified while they provide gig economy services. Gig workers may be classified as independent contractors by digital platforms that match workers? services with customer needs.
* This means the business, or the platform, must determine whether the individual providing the services is an employee or independent contractor.
* Taxpayers should review the worker classification [ [link removed] ] information on IRS.gov to see how they should be classified.
* Independent contractors may be able to deduct business expenses depending on tax limits and rules. It?s important for taxpayers to keep records of their business expenses.
*Paying the right amount of taxes throughout the year*
* Good recordkeeping [ [link removed] ] is important to navigate tax rules successfully and avoid mistakes when doing gig work.
* An employer typically withholds income taxes from their employees' pay to help cover income taxes their employees owe.
* Gig economy workers who aren't considered employees have two ways to cover their income taxes:
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* If they have another job as an employee, submit a new Form W-4 to their employer to have more income taxes withheld from their paycheck.
* Make quarterly estimated tax payments to help pay their income taxes throughout the year, including self-employment tax.
The Gig Economy Tax Center [ [link removed] ] on IRS.gov answers questions and helps gig economy taxpayers understand their tax responsibilities.
*More information*:
Gig economy and your taxes: things to know, Publication 5369 [ [link removed] ].PDF
Independent Contractor or Employee, Publication 1779 [ [link removed] ].PDF
Is My Residential Rental Income Taxable and/or Are My Expenses Deductible? [ [link removed] ]
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