Get Smart about Your Taxable Income from Gig Work.
October 30, 2023
Gig work, also known as the sharing economy or freelance work, is becoming increasingly popular. A recent study found that over 36% of the US workforce now participates in gig work, - such as driving a car for booked rides, selling goods online, renting out property or providing other on-demand work – and this number is expected to continue to grow in the coming years.
There are many reasons for the rise of gig work. Some people are drawn to the flexibility and independence that gig work offers, while others are looking for a way to supplement their income or start their own business. Whatever the reason, it's clear that gig work is here to stay.
However, there are some important tax implications to consider when doing gig work, and this article will provide an overview of some of the factors to consider.
We hope this information will help you to better understand your tax obligations as a gig worker.
Gig work is Taxable
Earnings from the gig economy are taxable regardless of whether you receive information returns (1099’s). If gig workers are self-employed, they must pay all Social Security and Medicare taxes on their income from the gig activity. It is important to accurately track all income from gig work, including payments collected by credit card, cash, property, goods, or virtual currency.
As a gig worker, you may be required to make quarterly estimated tax payments, so it’s important to understand your overall tax liability to avoid future penalties. Good recordkeeping of both your income and expenses related to gig work and advisement from an experienced tax professional will save you headache and avoid any surprises at tax time.
Proper Worker Classification
It is important for gig workers to understand how they are being classified when providing services, as employees and independent contractors have different rights and responsibilities.
In most cases gig workers will be classified as an independent contractor. However, it is important to note that there is no single factor that determines whether a worker is an independent contractor or an employee.
The chart below outlines a few of the key differences and the IRS offers resources to help you determine which classification is appropriate for your unique situation here.
We understand that the tax implications of gig work can be complex. If you have any questions or need assistance, please do not hesitate to contact us. Our experienced tax professionals can help you maximize your deductions and minimize your tax liability.