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Blogging Beyond the Numbers

Are you working a part-time “gig” job? Don’t forget about your tax obligations!
Posted by: Cheryl Wittmann 3 weeks ago

Do you receive income from one of the online platforms offering goods and services (e.g., Uber, Lyft, Airbnb or DoorDash)?  Keep in mind there are tax consequences for the people who perform these and other side jobs.  If you receive income from a “gig” or other sharing economy jobs, it’s almost ALWAYS taxable.  Even if you don’t receive a Form 1099 or W-2 reporting the amount of money you made, you need to report the gross income received (or credited to your bank account).

The IRS recently released a report examining two decades of tax returns titled “Is Gig Work Replacing Traditional Employment?”  The IRS report found that “alternative, non-employee work arrangements” grew by 1.9% from 2000 to 2016.  Furthermore, the report found that more than half of the increase from 2013 to 2016 could be attributed to gig work through one of the online labor platforms.  The study found that for the most part, gig work done by individuals are side jobs that supplement their traditional jobs rather than replacing traditional employment.

Unlike traditional employees, independent contractors don’t receive benefits associated with employment or employer-sponsored health insurance. Contract workers aren’t covered by minimum wage rules or other protections of federal laws and are not part of the states’ unemployment insurance systems. Finally, independent contract workers are on their own when it comes to training, retirement savings and taxes.

Gig Tax Considerations

If you’re part of the gig economy, here are some things to consider.

  1. You may need to make quarterly estimated tax payments because gig income is not normally subject to withholding. These estimated tax payments are generally due on April 15, June 15, September 15 and January 15 of the following year.
  2. You should receive a Form 1099-MISC, Miscellaneous Income, a Form 1099-K or other income statement from the online platform that reports the gross payments you received.
  3. The good news is, some or all of your gig business expenses may be deductible on your tax return. For example, if you provide rides with your own car, you may be able to deduct depreciation for the wear, tear, and deterioration of the vehicle (or claim the standard mileage rate for business miles). Be aware that if you rent a room in your main home or vacation home, the rules for deducting expenses can be complex due to the long standing loss and expense limits that apply to residences and vacation homes.

Gig Recordkeeping

It’s critical to keep good records tracking income and expenses in case you are audited. Please contact us if you have questions about your tax obligations as a gig worker or the deductions you can claim. You don’t want to overlook any eligible tax deductions and you need to be prepared for paying income tax and self-employment tax on your net gig earnings.

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