The gig economy, also called sharing or access economy, is activity where taxpayers earn income providing on-demand work, services or goods. Often, it’s through a digital platform like an app or website. While there are many types of sharing economy businesses, ride-sharing and home rentals are two of the most popular.
Here are some things taxpayers should remember:
• Income from these sources is taxable, regardless of whether an individual receives information returns. This is true even if the work is full-time, part-time or if an individual is
paid in cash.
• Taxpayers may also be required to make quarterly estimated income tax payments and pay their share of Social Security, Medicare or Medicaid taxes.
While providing gig economy services, it is important that the taxpayer is correctly classified.
• This means the business or the taxpayer must determine whether the individual providing the services is an employee or independent contractor.
• Taxpayers can use the worker classification page on IRS.gov to see how they are classified.
• Independent contractors may be able to deduct business expenses, depending on tax limits and rules. It is important for taxpayers to keep records of their business expenses.