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How the “Gig Economy” May Affect Your Tax Bill

  • 10 November 2016
  • Author: Alexander Carr
  • Number of views: 4298
How the “Gig Economy” May Affect Your Tax Bill

The new “sharing” or “gig” economy has given us all the option to earn a little extra cash on the side.  If you’re a driver for rideshares like Uber or Lyft,  rent property through a service like HomeAway or Airbnb, or participate in any other trendy “gigs”  like consulting through Upwork, the IRS has created a website to help spell out what part of your profit belongs to the government. 

The IRS calls its new site the “Sharing Economy Tax Center” and it covers many of the new ways individuals transact goods and services with the help of technology like websites and apps.

If you’re seasoned in hiring freelancers or temporary, seasonal or contract workers, or you’ve worked as a consultant yourself, you may already be familiar with the myriad (and often confusing) ways these services could be taxed. Earning income through what the IRS calls a “sharing economy activity” is no less confusing and may need any one of the following tax filings:

  • Form 1099-MISC, Miscellaneous Income
  • Form 1099-K, Payment Card and Third Party Network Transactions
  • Form W-2, Wage and Tax Statement

Simply put, any activity that earns you money or is worth something (even an in-kind trade of goods or services) is taxable. Ignore that fact and you might find yourself audited by the IRS and on the hook for much more in taxes than you anticipated. The good news, as the IRS even points out, is that “depending upon the circumstances, some or all of your business expenses may be deductible,” which could reduce or even eliminate the potential tax burden this may cause.

Since the “sharing” or “gig” economy is so new and evolving, it’s important to work with a tax professional to navigate it. Feel free to contact us for more information.

Image Copyright:  wutwhan / 123RF Stock Photo

Categories: Blog, General
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