If you work in the “gig economy,” you are not alone. Millions of people have made the same choice, voting with their feet and their time and leaving the world of traditional employment behind. The number of jobs in the gig economy has increased dramatically over the past few years, and even more so since the outbreak of the coronavirus pandemic. According to a survey conducted by Pew Research Center, 16% of U.S. citizens have made money on an online gig platform.
You probably don’t look forward to tax season as a gig worker. Everyone finds April 15 stressful, but gig workers face additional challenges. Facing these issues head-on is important.
Who Are Considered Part of the Gig Economy?
The gig economy has become so important to the U.S. economy that the IRS website now has a section called “Gig Economy Tax Center.” The IRS defines gig work as a specific activity you engage in to generate income, typically through an app or website (digital platform), such as:
- Driving a car to perform delivery and pickup services for paying customers
- Renting out a property or a portion of it
- Completing errands or tasks
- Selling products online
- Leasing equipment
- Providing creative or professional services
- Providing temporary, on-demand or freelance work
Note that the above list of gigs does not contain all types of gig work, but are the most common for freelancers and gig workers.
Three Steps to Tax Filing Success For Gig Economy Workers
It’s not uncommon for gig workers to fall behind on their tax obligations. If you are in tax debt, owe back taxes, or are under audit, our firm can assist you. We can help negotiate with the IRS and possibly settle your tax debt.
As a tax resolution company, we advise you to contact a professional who can negotiate and defend you aggressively with the IRS on your behalf. Contact us now. You have nothing to worry about, as our tax resolution specialists can navigate the IRS maze. With that said, here is a three-step strategy to make tax season more manageable:
Step 1 – Start As Early As Possible
It’s always a good idea to start tax preparation early, especially if you’re self-employed or work in the gig economy. If you’re used to completing your taxes late, you are about to get a big wake-up call in front of you. If you don’t start immediately, you might not complete your filing on time.
Remember that you might not be able to file early because it will probably take some time to understand the complex tax laws, find a suitable tax advisor, look into deductions, and ensure all your income numbers are accurate. However, it does not imply that you cannot begin early. By taking action now, you’ll have a less stressful time when the April 15 tax filing deadline arrives.
Step 2 – Make Sure You Are Accounting for All Your Income
It’s easy to lose track of your earnings when you’re self-employed, particularly if you work for multiple clients and do different gigs. If you let something fall through the cracks, the IRS will undoubtedly come after you with a hefty tax bill.
As you prepare to submit your taxes, it’s important to account for all the money you earned in the previous year, regardless of where it came from. This includes gig work, freelancing, consulting, and anything else that brings in money. It’s also a good idea to compare this money with what you’ve gotten from other sources, such as your bank and online payment systems like PayPal, Stripe, etc. This last procedure could potentially reveal hidden sources of revenue you may have overlooked.
Step 3 – Review Your Possible Deductions
Being a part of the gig economy can result in tax complications, but there’s also an advantage. You can access certain valuable tax deductions as a gig worker or self-employed person.
You can deduct certain legitimate business expenses to reduce your taxable self-employment income. This includes the amount you pay for internet access, phone service, and office supplies.
You can take the home office deduction if you have a space in your home that you use for business. Nevertheless, it is crucial to understand and adhere to the rules. Doing this wrong may result in receiving unwanted letters from the IRS. These rules can be tricky, which takes us to our last piece of guidance.
Advice for Workers in the Gig Economy
When you work for a traditional company, filing your taxes is easy. At the beginning of each year, your employer sends you a W2. On it, you simply report how much you made and how much you paid in taxes. You have to do some math from there, and your taxes will be done in no time.
When you do gig work and have income from self-employment, your life and tax situation get much more complicated. Even if you’ve always been good at doing your taxes, your first year of gig work might be the first time you need help.
The gig economy is doing well, and this fast-growing part of the economy doesn’t seem to be slowing down any time soon. If you’ve worked in this economy, you’ve probably enjoyed the freedom and flexibility that come with it. But now it’s time to pay the piper — and the IRS. The three-step plan above can make tax time at least a little easier, so you can get on with the rest of your life.
Help with Back Taxes
What you do next is critical if the IRS sends you a collection notice or a large tax bill. Trying to fight the IRS on your own is risky and could cost you a lot of money, so you should always call a tax resolution firm.
Working with a professional gives you access to important information about the IRS’s small business settlement programs. You can get the help you need to settle your tax bill for less than what you owe and get back in good standing with the IRS. When the IRS calls, time is of the essence. With interest and fees adding up, you don’t have a second to waste. Call us for a tax resolution case evaluation.