Perpetuated by the COVID-19 pandemic in 2020, the number of “gig-workers” has increased dramatically. With this increase in the workforce taking on what were once considered side jobs, that were intended to simply supplement income by occasionally driving for Uber or shopping for Instacart, gig work is now the primary source of income for a rapidly growing segment of workers. With the shift toward gig work, increased tax requirements and differing state policies abound that can translate into an unexpected tax bill at the end of the year. To guide gig workers through these considerations, the experts at Orlando based CPA Accounting & Tax Services outlines the 5 key things that gig workers need to know in order to accurately track and report their earnings.
1. Many states are now requiring gig platform companies to report their workers’ earnings through a 1099-K form directly to the state. However, they don’t provide it for the majority of gig economy workers who make under $20,000 annually and surpass state imposed minimum transaction thresholds. It is the gig workers responsibility to report their earnings if they fall under their respective state’s thresholds.
2. It is the gig worker’s responsibility to estimate self-employment tax payments, which need to be sent to the IRS each quarter. With traditional employment, state and federal income taxes are typically withheld automatically.
3. To ensure accurate tax reporting, gig workers should set aside at least 30% of their income for income taxes to be safe.
4. It is important for gig workers to track their earnings with detailed records of all income earned from all jobs worked throughout the year. It is important to keep these records in addition to the company provided records to ensure there are no discrepancies.
5. Keep track of and document all tax-deductible business expenses, including, but not limited to, mileage, office supplies, travel, etc. for accurate income tax reporting and to ensure you are qualifying for the correct deductions at the end of the year.
The gig economy is here to stay for the foreseeable future. Let us guide you through the state policies that affect you and your business. Contact the professionals at CPA Accounting & Tax Services to help guide you through tax season and beyond. We specialize in Business Accounting Services, Individual Tax Services, International Tax Services, Tax Planning and Tax Resolution Services. We have offices in Orlando, Florida and service clients worldwide. Find out how we can serve all of your accounting needs by contacting us today: www.cpaaccounting.biz