The IRS Has 7 Quick Tips for Taxpayers in the Gig Economy
In the increasing culture of regulation surrounding gig, or contingent, workers, with state legislatures on both coasts issuing new rules on what type of worker is classified as an independent contractor or contignentextended worker, the IRS is continuing to share support and information for contignent workers as we enter tax season.
The IRS recently released Tax Tip 2020-06, which details important information that contingent workers need to be aware of as April 15 quickly approaches.
The Gig Economy Can Affect a Contingent Worker's Bottom Line
Tax laws are confusing with all of the rules and exceptions to those rules, which is why certified public accounts require such stringent training and education to help businesses and individuals manage their tax liabilities. Even so, as an individual participating in the gig economy, it is up to you to also be aware of what is within your purview.
The IRS released these 7 tax tips:
- Money earned through this work is usually taxable.
- There are tax implications for both the company providing the platform and the individual performing the services.
- This income is usually taxable even if the a) taxpayer providing the service doesn’t receive a Form 1099-MISC, Form 1099-K, or Form W-2; b) part-time or side work is also taxable; and c) the contractor or contingent worker is paid only in cash.
- Contingent workers in the gig economy are generally required to income taxes, Federal Insurance Contriubtion Act (FICA) or Self-Employment Contribution Act tax, and additional Medicare taxes.
- Independent contractors may be able to deduct business expenses but should be aware of the rules surrounding deductions and contact a tax professional if guidance is needed.
- Special rules do apply to rental properties that are also used as a residence during the tax year.
- Workers who do not have taxes withheld from their pay have two ways to pay their taxes in advance. Here are these two options:
- Gig economy workers who have another job where their employer withholds taxes from their paycheck can fill out and submit a new Form W-4. The employee does this to request that the other employer withholds additional taxes from their paycheck. This additional withholding can help cover the taxes owed from their gig economy work.
- The gig economy worker can make quarterly estimated tax payments. They do this to pay their taxes and any self-employment taxes owed throughout the year.
WorkMarket helps Businesses and Contingent Workers Navigate the Gig Economy
Tax season can be a stressful, confusing time for all businesses and individuals who are not tax professionals. Properly estimating your tax liabilities can help reduce this confusion, and solutions such as WorkMarket’s Freelance Management Solution can help both sides of the coin keep on top of their tax liabilities. Contact us today to find out how.