In recent years, the gig economy has changed how people do business and provide services. Taxpayers must report their gig economy earnings on a tax return \u2013 whether they earned that money through a part-time, temporary or side gig. The IRS\u2019 Gig Economy Tax Center provides information and resources to help this group of entrepreneurs and workers understand and meet their federal tax obligations.
\nHere are key things for individuals involved in the gig economy to remember as they get ready to file in 2023.
\nGig economy income is taxable
\n\u2022 Taxpayers must report all income on their tax return unless excluded by law, whether they receive an information return such as a 1099 or not.
\n\u2022 Individuals involved in the gig economy may also be required to make quarterly estimated tax payments to pay income tax and self-employment tax, which includes Social Security and Medicare taxes. The last estimated tax payment for 2022 is due Jan. 17, 2023.
\nWorkers report income according to their worker classification
\nGig economy workers who perform services, such as driving a car for booked rides, running errands and other on demand work, must be correctly classified. Classification helps the taxpayer determine how to properly report their income.
\n\u2022 If they are employees, they report their wages from the Form W-2, Wage and Tax Statement.
\n\u2022 If they are an independent contractor, they report their income on a Schedule C, Form 1040, Profit or Loss from Business – Sole Proprietorship.
\nThe business or the platform determines whether the individual providing the services is an employee or independent contractor. The business owners can use the worker classification page on IRS.gov for guidance on properly classifying employees and independent contractors.
\nExpenses related to gig economy income may be deductible
\nIndividuals involved in the gig economy may be able to deduct expenses related to their gig income, depending on tax limits and rules.
\n\u2022 Taxpayers may be able to lower the amount of tax they owe by deducting certain expenses.
\n\u2022 It is important for taxpayers to keep records of their business expenses.
\nPay the right amount of taxes throughout the year
\nAn employer typically withholds income taxes from their employees’ pay to help cover taxes their employees owe.
\nIndividuals involved in the gig economy have two ways to cover their taxes due:
\n\u2022 If they have another job where they are considered an employee, they can submit a new Form W-4, Employee’s Withholding Certificate to their employer to have more taxes withheld from their paycheck to cover the tax owed from their gig economy activity.
\n\u2022 They can make quarterly estimated tax payments throughout the year.
\nMore information:
\nPublication 525 Taxable and Nontaxable Income
\nPublication 1779, Independent Contractor or Employee<\/p>\n","protected":false},"excerpt":{"rendered":"
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