AP/Brennan Linsley
Gig workers have to pay taxes, too.
- If you're a gig worker, the IRS is expecting you to pay federal income taxes on any dollar you earned above $400 throughout 2019.
- The IRS classifies gig work as "providing on-demand work, services, or goods" for additional income not related to W-2 employment.
- This includes, but is not limited to, driving for a ride-share company, delivering food or groceries, selling goods on digital marketplaces, or renting out your home.
- You can visit the IRS' new Gig Economy Tax Center page for more information on filing your taxes as an independent contractor.
- Read more personal finance coverage.
The gig economy is integral to millions of Americans' livelihood, and the IRS is itching to take its share.
On Thursday, the government agency launched the Gig Economy Tax Center on its website, an informational hub for part-time, temporary, and contract workers seeking guidance on whether they have to pay taxes on their income. If you earned more than $400 from side jobs in 2019, the answer is yes.
The IRS says the gig, or sharing, economy includes any "activity where people earn income providing on-demand work, services or goods," such as ride-sharing and delivery services, renting out property, running errands, and selling products online. That means if you earned money from Uber, Lyft, Postmates, Airbnb, Instacart, Etsy et al., you may be on the hook for federal income taxes.
That's because the IRS requires that anyone earning non-W-2 income from a job be classified as an independent contractor, even if they also hold a job as a W-2 employee. These workers often must pay estimated quarterly self-employment income taxes on their additional income, as well as their share of FICA and Medicare taxes.
As it relates to the 2020 tax season - when Americans file taxes for income earned in 2019 - the business(es) who paid you for on-demand work may send forms to the IRS to report those payments, depending on how they classify and pay workers, including forms 1099-MISC, Miscellaneous Income and 1099-K, Payment Card and Third Party Network Transactions.
The IRS says businesses are required to file a 1099-MISC form for workers who they paid more than $600 throughout the year. You should receive copies of these forms by January 31, which you can use to file your 2019 tax return.
If you don't receive these forms, you'll need to rely on your own payment records to report all income earned from temporary or part-time sources - including cash - on your tax return if it is more than $400. And if you plan to continue earning income from side jobs in 2020, consult the IRS for rules and due dates for paying quarterly taxes so you don't get slapped with penalties or a huge bill next year.
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