Internet-based temporary work through services, such as Lyft and Grubhub, have proliferated the rise of the “gig economy.” Gig workers find working on their own schedules and in changing environments very appealing. Of course just like an employee, gig workers are often required to pay taxes. The IRS views these gig workers essentially as independent contractors, which come with the ramifications of taxes as a self-employed worker.
Gig Worker Tax Pointers
Here are some things gig workers should be aware of when the time to file taxes comes around:
- Self-employed workers have an obligation to file their taxes if they make at least $400 in a year.
- As a self-employed worker, you get paid up front for your services. However, this comes with the added responsibility of being mindful of setting aside a portion of those earnings for your taxes.
- “Self-employment taxes” as most tax professionals understand it, mean the Social Security and Medicare tax shares that employers and employees normally pay. Employees usually have a portion of their check cut for those taxes. Self-employed people must pay BOTH the employer AND employee share of taxes (15.3% for 2018). However, a portion of this may be deductible.
- Self-employed workers who are expected to owe $1,000 or more in taxes must also make estimated tax payments quarterly throughout the year. Use the 1040-ES.
- Businesses who have paid independent contractors less than $600 are not required to send 1099-MISC forms, so self-employed gig workers should check their earnings and contact businesses they have worked with in the past year (Check our article for more info on if your client should send you a 1099-MISC form).
- Self-employed individuals can claim a variety of business-related expense deductions, such as home office deductions, depending on the nature of those expenses and meeting certain criteria. Check our deduction articles for more information.
Self-employed gig work has limitless potential to be lucrative and many deductions to claim, but they also come with a lot of tax concerns. MiklosCPA has helped many small businesses, like sole proprietors and partnerships, with their tax and accounting needs. We use contemporary “virtual office” services so that business clients can readily reach us. If you wish to know more of how our services work, contact us. Also, follow us on our social media pages for regular “good to know” postings like this article.