Last week we broke down the differences between employees and contractors, this week we’ll dive a little deeper into worker classifications.
By now, you’ve likely heard of the gig economy. You may even be part of that economy. One thing that is true, the gig economy is not a fad. It has staying power.
Today, we’ll discuss the gig economy from the IRS perspective and how TSAT can help you the total implications of your gig work on your finances.
Ready, let’s go!
We’ll start with the basics; how does the IRS see the gig economy?
The IRS defines as follow, “The gig economy—also called sharing economy or access economy—is activity where people earn income providing on-demand work, services or goods. Often, it’s through a digital platform like an app or website.”
Gig work is certain activity you do to earn income, often through an app or website (digital platform), like:
- Drive a car for booked rides or deliveries
- Rent out property or part of it
- Run errands or complete tasks
- Sell goods online
- Rent equipment
- Provide creative or professional services
- Provide other temporary, on-demand or freelance work
Note: This list does not include all types of gig work.
What are Digital Platforms?
Digital platforms are businesses that match workers’ services or goods with customers via apps or websites. This includes businesses that provide access to:
- Ridesharing services
- Delivery services
- Crafts and handmade item marketplaces
- On-demand labor and repair services
- Property and space rentals
- Note: This list does not include all types of digital platforms.
Great, now we have a good idea of what to look for when defining gig work. Moving on…The next immediate statement from the IRS: Gig Economy Income is Taxable
Oh boy, here we go. The fun stuff!
You must report income earned from the gig economy on a tax return, even if the income is:
- From part-time, temporary or side work
- Not reported on an information return form—like a Form 1099-K, 1099-MISC, W-2 or other income statement
- Paid in any form, including cash, property, goods, or virtual currency
No worries, TSAT is here for your every financial need! Whether you are an individual or small business, bring us your toughest financial questions and situations and we will provide financial HOPE!
Some Final Thoughts on the Gig Economy
The COVID-19 workplace continues to face numerous challenges, and gig workers may become critical to ensuring companies remain flexible during these uncertain times. With workers increasingly turning to gig work to supplement existing income or to bolster their income in retirement, workers and business must manage these jobs accordingly.
For our small business clients, in addition to the business opportunities, TSAT will work with you to understand how your small business can leverage gig workers as a seasonable/flexible workforce to achieve agility and further enhance their skill sets without having to make major talent investments.
As you can see, there are many opportunities for individuals and business to leverage the gig economy. However, the freedom of gig work can does come at a cost. TSAT is here to help you understand your personal and business worker classifications, understand your tax implications, and work with you to understand your finances as a whole!
Here at TSAT, we are not simply tax preparers. We work with you to provide a 360-degree strategic financial advice. We will help you stay ahead of the curve when it comes to gig worker regulations and compliance, as well as talent/compensation and process improvements.
If you are a gig worker or small business owner looking to grow your business, TSAT’s AMAZING team considers much more than just your taxes!
TSAT’s Services will let you focus on your business’s core competencies! Whether you have a small business or you need help personally, TSAT can give you HOPE! Call us today!
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