Those working in the fast-evolving and expanding “sharing” or “gig” economy have it a bit tougher when figuring out their income taxes.

IRS Offers Guidance for Taxpayers Working the ‘Gig’ or ‘Sharing’ Economy

IRS Offers Guidance for Taxpayers Working the ‘Gig’ or ‘Sharing’ Economy

Those who work in the fast-evolving and expanding “sharing” or “gig” economy have it a bit tougher when figuring out their income taxes. Most are not full-time employees and are basically consultants, contractors, free-lancers or making extra money as entrepeneurs.

Uber, Lyft and Airbnb are among the giants in the sharing space that are upending how many Americans figure out their taxes. So the Internal Revenue Service is proving a special webpage of resources to help this growing class of taxpayers. The IRS, working in conjunction with the National Taxpayer Advocate, has set up the new Sharing Economy Resource Center.

“This rapidly evolving area often presents new challenges for people engaged in these economic activities, whether they are renting a room or providing a ride,” said IRS Commissioner John Koskinen. “The IRS is working to help people in this area by providing them the information and resources they need to file accurate tax returns.”

The new Resource Center offers help on making quarterly estimated tax payments, figuring self-employment taxes and clarifying special rules for reporting vacation home rentals. “In addition, tax-preparation software can be a helpful resource in this area, and a trusted tax professional may assist with many issues,” the IRS says.

Here are four major areas emphasized by the IRS for those in the sharing economy:

Taxes. Income received is generally taxable, even if the recipient does not receive a Form 1099, W-2 or some other income statement.
Rentals. Special rules generally apply to the rental of a home, apartment or other dwelling unit that is used by the taxpayer as a residence during the taxable year. Usually, rental income must be reported in full, any expenses need to be divided between personal and business purposes and special deduction limits apply. But if the dwelling unit is rented out fewer than 15 days during the year, none of the rental income is reportable and none of the rental expenses are deductible.
Deductions. There are some simplified options available for deducting many business expenses for those who qualify. For example, a person who uses his or her car for business often qualifies to claim the standard mileage rate, currently 54 cents a mile for 2016.
Estimated Payments. The U.S. tax system is pay-as-you-go. This means that people involved in the sharing economy often need to make estimated tax payments during the year to cover their tax obligation. These payments are due on April 15, June 15, Sept. 15 and Jan. 15. Use Form 1040-ES to figure these payments.

 

 

Leave a Reply