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Reporting Gig Economy Income on Your Taxes

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Whether it’s a side income or your full-time income, taxpayers must report gig economy income on their tax return.

Many people are considering alternate methods of income, whether it’s freelance work, or your new side business. What do these methods of income mean for your taxes? Here’s how to understand gig work and your taxes.

Please note this information came from the Internal Revenue Service’s website. We encourage you to visit government websites or consult a tax advisor for your specific tax needs.

What is the Gig Economy?

According to the IRS, the gig economy is an on-demand, sharing, or access economy. People involved in the gig economy typically earn their income as freelancers, independent workers or employees.

There’s technology, online platforms, and apps which connect them with customers to provide on-demand work, services or goods, such as renting out houses or spare rooms, and providing delivery services.

Gig Economy Income is Taxable

Money you earn through these methods is usually taxable. Tax implications also exist for the company providing the online platform and the individual providing goods or services. You must report income earned from the gig economy on a tax return, even if the income is:

  • From part-time, temporary or side work
  • Not reported on an information return form—like a Form 1099-K, 1099-MISC, W-2 or other income statement
  • Paid in any form, including cash, property, goods, or virtual currency

What is Gig Work?

Gig work is where you earn any sort of income, often through an app or website. A few examples of gig work include:

  • 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 the Digital Platforms?

Online and digital platforms are businesses that provide customers with goods or services. These include businesses that provide:

  • Ridesharing services
  • Delivery services
  • Crafts and handmade item marketplaces
  • On-demand labor and repair services
  • Property and space rentals

Independent Contractor or Employee

For Federal Tax purposes, worker classification affects how you pay your federal income tax, social security, Medicare benefits, employer provided benefits and your tax responsibilities.

Independent contractors may be able to deduct business expenses. Remember to check the rules around deducting expenses related to specifics of deductions, and maintain your records of business expenses.

Use this brochure from the IRS to help determine your work status.

Managing Taxes for Gig Work and Digital Platforms

  • Gig workers

    - to find forms, keep records, deduct expenses, file and pay taxes for your gig work, visit the IRS website for gig workers.
  • Digital platforms and businesses

    - to classify workers, report payments, pay and file taxes for a digital marketplace or business, you can visit the IRS website for digital platforms.

For more information on the gig economy and taxes, please visit the IRS’s Gig Economy Tax Center.

Sources:

Taxpayers must report gig economy income on their tax return, IRS.gov

Gig Economy Tax Center, IRS.gov

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