Why You Should Care About The “Gig” Economy
In the past decade technology has completely changed the way that people earn extra cash. With the rise of the smartphone and the creation of endless apps, there are also endless opportunities. Did you know that the rise of the “side hustle” could change the way that the federal tax system treats employees?
What Is The Gig Economy?
The gig economy is made up of self-employed individuals who offer their services over a variety of platforms. Have you ever used a ride-sharing app, a home-sharing app, or purchased something unique from an artist online?
These are all examples of “gigs”. We use these services everyday….when you need a ride, when you want somewhere to stay on vacation, when you need someone to walk your dog during the day. You name it, an entrepreneur has created an app to facilitate it.
Did you know that now 10% of american workers use the gig economy for a “side hustle”. The Bureau of Labor Statistics reported this number as an estimate. It is also estimated that about 83% of these workers make about $500 or less a month. So, how do people classify and report these extra earnings? This is where it gets complicated…
How Are “Gig” Workers Classified
This is a big question facing both employers and tax professionals alike. For tax purposes these individuals are treated in three different ways.
If you are working through a ride-sharing app, a food delivery app, or any service related app then you are most likely classified as an independent contractor. This is the most common classification.
If you rent out a room in your home or even your whole home to vacationers then you are considered a landlord and you must act accordingly on your taxes.
If you are selling products through an online platform then you are treated like a small business owner.
What Are The Complications?
As you can, see these workers are being treated completely differently when it comes time for their taxes. The even bigger complication is that there are many workers who don’t know how to report this income. This often results in incorrect filing or even not filing at all.
Sometimes the business owners behind these services don’t furnish their employees with the correct wage forms. In response, contractors will assume that they don’t have to report it. The form that independent contractors are generally supplied with is the 1099-MISC. With all of this unreported income, programs like Social Security lose out.
So, how do we get these new businesses and their employees on the same page? This is the question that policy makers in the tax world are considering.
TaxBandits To The Rescue…
The “side hustle” has been updated through technology. Thanks to TaxBandits, tax forms and filing with the IRS have been updated too! Whether you are the owner of a booming online business or an entrepreneur looking for a solution to furnishing 1099’s to their contractors, TaxBandits is the solution! Create a free TaxBandits account today and get started e-filing today!
