The rise of the digital age has changed not only how we live, but also how we work. If you are now working in the Gig Economy, how can you find out what your tax obligations are?
Technological advances and digital platforms were already making the gig economy part of our life on a large scale, but the economic and health crisis has made many more people turn to this type of work in the last year. If this is your case, the IRS is offering help to businesses and workers through the Gig Economy Tax Center so they can meet their tax obligations.
The gig economy is one that’s defined by freelance and contract work, rather than permanent positions, and the reason why it has been under scrutiny for the past couple of years is that technology has lowered barriers to entry so much that “gigs” have become easily accessible to an unprecedented number of people.
It's estimated that 36% of US workers take part in the gig economy and 33% of companies extensively use gig workers and it encompasses all sorts of contingent work arrangements such as freelancers, consultants, temps and independent contractors, and professionals.
The gig economy—also called sharing economy or access economy—is an activity where people earn income providing on-demand work, services, or goods, often through a digital platform like an app or website.
Though many may not think it is, gig economy income is taxable, and this is why the IRS has created the Gig Economy Tax Center to help to meet their tax obligations.
According to the agency’s website, income earned from the gig economy must be reported 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 another income statement
• Paid in any form, including cash, property, goods, or virtual currency
Gig work is a certain activity you do to earn income, often through an app or website (digital platform), like:
• Driving a car for booked rides or deliveries
• Renting out property or part of it
• Running errands or complete tasks
• Selling goods online
• Renting equipment
• Providing creative or professional services
• Providing other temporary, on-demand, or freelance work
The IRS has also clarified that digital platforms are businesses that match workers' services or goods with customers via apps or websites, that include businesses that provide access to:
• Ridesharing services
• Delivery services
• Crafts and handmade item marketplaces
• On-demand labor and repair services
• Property and space rentals
If you are included in any of these activities and are not sure how to file your tax return, the IRS Gig Economy Tax Center helps businesses and workers meet their tax obligations while working in the sharing economy.