Even though the pandemic is pretty much over, and we hope it stays that way, and a lot of taxpayers have returned (boomeranged) to their previous traditional jobs, the IRS is still very serious about collecting income tax revenue from the Gig Economy. During the worst of the pandemic when many businesses were laying off workers or shut down, many of us turned to the gig economy for part time and even full time jobs to make ends meet.
Even though gig jobs may have been fleeting, the income is taxable and reportable, and the IRS wants its cut. 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
Yes, cash payments from your gig work need to be reported.
Fortunately, Gig workers have an opportunity to deduct their costs and expenses which can limit their tax bills. But in order to maximize your deductions for gig work you must maintain good records to properly claim these expenses. Your records might include a mileage log for drives you made, or a careful inventory of products your bought and resold. What records you have or need will vary with the type of gig work you had or still have.
Some common Gig jobs include:
- 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
Keep track of your costs. They are key for Gig workers. I have a friend who during the pandemic bought excess building materials from wholesalers and home decor items that were never used in construction projects and resold those items. Their deductions included sales receipts as well as mileage logs for pickups and deliveries, costs for advertising and records of sales taxes that were collected and paid.
While gig jobs helped many families to survive, if you are still having a problem with your tax debt you may need more than a side hustle to pay off your tax debts. You might find relief from a Fresh Start Initiative or an Offer In Compromise from the IRS. Call us now at the number on this page so we can give you free information about these options that might reduce or even eliminate your IRS tax debt. There is help and guidance available and it starts with a free phone call.