2020 Changes the Way Gig Income is Reported on Your Taxes

Last year was difficult for so many people dealing with the effects of Covid-19 leaving many to take on multiple jobs to make ends meet in such uncertain times. There’s one important thing you need to know about how this affects your taxes this year, bottom line all gig work needs to be reported on your 2020 return.

Overview of work classified as gig:

Positions classified as on-demand, access economy, or sharing would be subject to this new clarification. Similar work is also often referred to as freelance, employee, or independent workers. Services providing goods or services from an employee to customers using digital platforms. Even including services like renting rooms, a house or delivering goods would lie under this category.

Important tax payer information regarding gig economy and taxes:

-Income earned through all avenues mentioned above are taxable

-Penalties can occur for employees and companies involved in these services

-Taxable profits include:

   -Income earned even if no 1099  or W-2 is issued

   -Position is part times or side work

   -Employee is paid solely in cash

-All income is subject to income tax, Federal Insurance Contribution Act or Self-Employment Contribution Act tax,  and Medicare.

-Some independent contractors might be eligible for business deductions but please talk with your licensed professional before deducting anything like cars, food, housing, or any other expenses. And always with written records of all purchases.

-There may be exceptions to rental property income when used as a primary residence during the filing year in question. Renters should keep in mind that rental income is typically subject to taxes.

-Employees who do not have taxes withheld have two options:

   -If an employee has a primary position where taxes are withheld they can file a W-4 requesting an employer withhold additional taxes from each paycheck. This would be to cover any additional taxes from a second position. 

   -A gig worker can also make quarterly estimated tax payments covering yearly taxes incurred through work.