Filing taxes will now be a little bit easier for gig workers, freelancers and independent contractors.
The Internal Revenue Service announced Thursday that it had launched its first ever Gig Economy Tax Center, an online portal that helps gig workers manage their tax obligations. The resources aim to alleviate confusion around what forms gig workers need to use and when they need to file them. The portal also includes tax information for businesses that hire gig workers.
“The IRS developed this online center to help taxpayers in this emerging segment of the economy,” IRS Commissioner Chuck Rettig said in an announcement. “Whether renting out a spare bedroom or providing car rides, we want people to understand the rules so they can stay compliant with their taxes and avoid surprises down the line.”
The new IRS portal includes resources that assist with:
Advice on tracking income and expenses, plus all the related forms.
Estimating Quarterly Taxes
Quarterly tax requirements and an online payment tool.
Gathering Income Forms
Links and explanations to the different types of income forms, with instructions on subtracting expenses.
Filing Tax Returns
Last-minute reminders and a list of online, in-person and snail-mail filing options.
The IRS lists several wide-ranging examples of the type of work included in its definition of the gig economy:
- Driving vehicles for booked rides or deliveries
- Completing tasks or errands
- Selling things online
- Renting out miscellaneous equipment
- Renting out property or rooms
- Providing other freelance, creative, professional or on-demand services
All of the above examples are subject to taxation if the gig worker or contractor nets more than $400 during the tax year.
“Educating gig economy workers about their tax obligations is vital because many don’t receive form W-2s, 1099s or other information returns for their work in the gig economy,” the new IRS site states.
Often times, popular gig companies do not automatically send paper tax documents to gig workers – regardless if they owe the IRS. Part-time W-2 employees typically receive physical tax documents from their employer, making it clear they have to file taxes for that income. When gig workers don’t receive tax documents, they may think they don’t have to record their earnings.
Uber’s tax policy, for example, states that the company sends 1099-K forms only if a driver earns more than $20,000 and has completed 200 rides or deliveries. Uber sends a 1099-MISC, a separate tax form, if a driver earns more than $600 from promotions, bonuses and referrals.
Both examples exceed the IRS’s $400 limit. Instead of receiving tax documents from Uber, drivers must check a “Tax Information Tab” in the app and self-report the income to the IRS.
The new portal also assists with thornier tax issues like withholding taxes, deducting business expenses and filing taxes from a main W-2 job along with 1099 side-hustle income.
Expecting to owe more than $1,000 in annual taxes? As an independent contractor, you’re required to file quarterly taxes.
Last tax season, freelancers, gig workers and independent contractors saw their tax burden lessen due to the Tax Cuts and Jobs Act. Under the 2018 law, most independent contractors can deduct 20% of their income while remaining eligible for the $12,000 (single) or $24,000 (joint) standard deductions.
Luke Richardson, a certified public accountant, IRS enrolled agent and tax professor at the University of South Florida, told Codetic the stacked deductions present a “terrific opportunity for participants in the freelance and gig economy.”
Now, with the new Gig Economy Tax Center, gig workers will better be able to take advantage of them.
Adam Hardy is a staff writer at Codetic. He covers the gig economy, entrepreneurship and unique ways to make money. Read his latest articles here, or say hi on Twitter @hardyjournalism.