The gig economy is also referred to as the on-demand, sharing, or access economy. People involved in the gig economy earn income as a freelancer, independent worker or employee. Typically, an online platform is used to connect people with potential or actual customers to provide goods or services. Examples include renting out a home or spare bedroom and providing meal delivery services or rides.
During the pandemic, many people joined the ranks of the gig economy to help make ends meet. Whether you are part of the gig economy because it’s a primary source of income or want to make extra money with a side business, all taxpayers need to understand that they must report gig economy income on their tax return.
Here’s what you should know about the gig economy and your taxes:
1. Money earned through this work is usually taxable.
2. There are tax implications for both the company providing the platform and the individual performing the services.
3. This income is usually taxable even if:
4. People working in the gig economy are generally required to pay:
5. Independent contractors may be able to deduct business expenses. These taxpayers should double-check the rules around deducting expenses related to the use of things like their car or house. They should remember to keep records of their business expenses.
6. Special rules usually apply to rental property also used as a residence during the tax year. Taxpayers should remember that rental income is generally fully taxable.
7. Workers who do not have taxes withheld from their pay have two ways to pay their taxes in advance. Here are these two options:
For more information on the gig economy, please call the office.
Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties. If desired, we would be pleased to perform the requisite research and provide you with a detailed written analysis. Such an engagement may be the subject of a separate engagement letter that would define the scope and limits of the desired consultation services.