Gig Economy Income and Your Taxes
Regardless if it's a side hustle or your full-time job, you must report gig economy income on your tax return.
There are many people considering alternate means of income, whether they are freelance or running a side business. What does it mean for your taxes? Here’s how to understand the tax implications of gig work.
We encourage you to consult a tax adviser about your specific tax needs or visit government websites for further information.
What is the Gig Economy?
The IRS considers the gig economy an on-demand, sharing, or access economy.
Individuals who are part of the gig economy generally earn a living as freelancers, independent workers or employees. There are technology, online platforms, and apps which connect them with customers to offer on-demand jobs, services or goods, such as offering spare rooms for rent and delivering goods.
Gig Economy Income is Taxable
It is usually taxable to earn money by means such as these. Tax implications also apply for the companies that provide online platforms and the individuals who provide goods and 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?
You can earn any sort of income through gig work through apps or websites. 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 Digital Platforms?
A business provides goods or services to its customers over an online or digital platform. A few examples of these services include:
- Ridesharing services
- Delivery services
- Crafts and handmade item marketplaces
- On-demand labor and repair services
- Property and space rentals
Independent Contractor or Employee
Federal taxation depends on worker classification, which affects your federal income tax, social security benefits, Medicare benefits and employer provided benefits.
Independent contractors can deduct business expenses. Be sure to research the rules regarding deductions especially related to deductions, and maintain records of the business expenses you incur. 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.
Gig Economy Tax Center, IRS.gov
The information provided in these articles is intended for informational purposes only. It is not to be construed as the opinion of Central Bancompany, Inc., and/or its subsidiaries and does not imply endorsement or support of any of the mentioned information, products, services, or providers. All information presented is without any representation, guaranty, or warranty regarding the accuracy, relevance, or completeness of the information.