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IRS Unveils New Online Resource for Freelancers

What is the Gig Economy Tax Center?

Freelancers aren’t a new part of the workforce, but the rapid growth of contract labor has popularized terms like “gig economy” and “on-demand work.” To help taxpayers, the Internal Revenue Service unveiled a new online resource: the Gig Economy Tax Center.

The IRS explains that the gig economy largely gained momentum through app-driven services: “The gig economy … usually includes businesses that operate an app or website to connect people to provide services to customers. While there are many types of gig economy businesses, ride-sharing and home rentals are two of the most popular.”

Taxpayers accustomed to earning their income as an employee might not realize they need to keep track of the extra money generated by their weekend Uber work: “Many don’t receive Form W-2s, 1099s, or other information returns for their work … [despite the fact that] income from these sources is generally taxable, regardless of whether workers receive information returns.” Further, newly minted freelancers also might not realize there are other responsibilities that come with taking on contracted work.

The IRS hopes to address these awareness problems with the Gig Economy Tax Center, which will help fill in the blanks on a number of freelance tax issues:

  • Filing requirements
  • Making quarterly estimated income tax payments
  • Paying self-employment taxes
  • Paying FICA, Medicare, and Additional Medicare
  • Deductible business expenses
  • Special rules for reporting vacation home rentals

While these resources are not a replacement for a qualified tax professional, they can be an excellent supplement for taxpayers to lean on when putting together their information packet.

How do I use the Gig Economy Tax Center?

The first thing you see after navigating to the Gig Economy Tax Center are subheadings addressing basic gig economy topics—“What is the Gig Economy?,” “Gig Economy Income is Taxable,” “What is Gig Work?”—and two blue buttons in the middle of the page: Manage Taxes for Your Gig Work and Digital Platforms for Businesses.

Manage Taxes for Your Gig Work provides a number of resources specific to independent contractors:

  • Accordion menu containing a to-do list that includes links to relevant publications and forms for topics like record keeping, making payments, and preparing tax information for filing a tax return
  • Help menu with links to pages that explain IRS notices, the 1099-K, and how to determine if you’re an independent contractor or an employee
  • Estimated tax information, like due dates and a Make a Payment button that links to the “Paying Your Taxes” page

Digital Platforms for Businesses has information tailored to taxpayers who “operate a digital platform, marketplace, or business in the gig economy.” At first glance, this page looks sparse when compared to Manage Taxes for Your Gig Work, but the accordion menu contains information for four important business topics: “Classify Workers,” “Report Payments,” “File and Pay Taxes,” and “Help Workers Meet Their Tax Obligations.”

Sources: IR-2020-04; “Gig Economy Tax Center

Story provided by TaxingSubjects.com