IRS announced in IR-2020-4 that it launched the Gig Economy Tax Center on its website. The Center provides guidance for the people who earn income providing on-demand work, services or goods, often times though an app or website or other type of digital platform.
Example Of Gig Work
The most popular gig economy businesses are home rentals and ride-sharing, but there are many other types and the IRS website gives several examples (this list is not all inclusive):
- Drive a car for booked rides or deliveries
- Rent out property or part of it
- Run errands or complete tasks
- Sell goods online
- Rent equipment
- Provide creative or professional services
- Provide other temporary, on-demand or freelance work
What are Digital Platforms?
IRS defines digital platforms as “businesses that match workers’ services or goods with customers via apps or websites. This includes businesses that provide access to:
- Ridesharing services
- Delivery services
- Crafts and handmade item marketplaces
- On-demand labor and repair services
- Property and space rentals
with a note that the above list does not include all types of digital platforms. “
Taxes on Gig Work Income
You must pay taxes on the income you earn from your gig work, even if you don’t receive a 1099 form. You must maintain records and receipts during the year for the income and expenses you incur and pay estimated tax quarterly.
If you are self-employed and your earnings are over $400, you must file a tax return. You can reduce your taxes by claiming business expenses, like: supplies, office expenses, mileage, home office deduction, etc.
If you do gig work as an employee, your employer should withhold tax from your paycheck.
If you sell goods or provide taxable services, you might be subject to state sales tax and you are required to get a sales tax permit and collect, pay and report sales tax.
In case you use subcontractors that you pay $600 or more during the year you need to file forms 1099-NEC.
And if you have employees you need to file payroll reports.
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