Earlier this year, the IRS has announced in IR 2020-4 that it had launched the Gig Economy Tax Center on it’s website, IRS.gov. The new website provides guidance specifically designed for gig economy workers and businesses, i.e., those people who earn income providing on-demand work, services or goods.

Background

The gig economy is also known as the sharing, on-demand or access economy. It usually includes businesses that operate through a digital platform, an app or website, to connect people and to provide services to customers. While there are many types of gig economy businesses, ride-sharing (i.e. Uber/Lyft) and home rentals (i.e. AirBNB) are two of the most popular.

Often, gig economy activity is through a digital platform like an app or website.

IRS summarizes the unique tax aspects of the gig economy

IRS notes that the nature of many gig economy pursuits result in workers not receiving form W-2s, 1099s or other information returns for their work in the gig economy. However, notwithstanding the non-receipt of these common information returns, income from these sources is generally taxable, regardless of whether workers receive information returns. This is true even if the work is fulltime, part-time or if the person is paid in cash. Workers may also be required to make quarterly estimated income tax payments, pay their share of Federal Insurance Contribution (FICA), Medicare and Additional Medicare taxes if they are employees and pay self-employment taxes if they are not considered to be employees.

Resources on the new website

The new website covers many topics, including:

• filing requirements
• making quarterly estimated income tax payments
• paying self-employment taxes
• paying FICA, Medicare, and Additional Medicare
• deductible business expenses
• special rules for reporting vacation home rentals

The website contains separate sets of information for gig economy workers and businesses workers and for digital platforms and businesses.

(This is Blog Post #811)