Kelly Bullis
Are you among the one in three Americans who are involved in the “gig economy”? (Gig is also known as the “sharing economy.”)
There are some special tax consequences to pay attention to.
The first is the IRS. They’ve been working hard to get a reporting system in place to alert them of who is earning gig income. Getting the main companies, such as Uber, Lyft, Grub-Hub, etc., to report gross income on a form 1099. If don’t report the same or higher amount on your personal tax return, you will get a notice from the IRS as well as new attention and scrutiny. So, be honest, report all the income you receive from gig earning activity.
You are allowed to deduct related business expenses ordinary and necessary to provide the gig services. For most, using your auto means deducting auto-related expenses. Like any business, you have two options on how to deduct auto expenses. Just remember, for as long as you own that particular vehicle, you are stuck with whatever option you choose in the first year. Actual expenses or mileage. Mileage is the most simple. Just keep track of the business miles you drive and multiply them by the official IRS mileage rate (currently $0.67 a mile). Actual expenses are just what the name implies. ALL actual expenses you pay to maintain a vehicle. Gas, oil, registration, insurance, repairs, depreciation, etc.
Keep good records. Mileage logs, meals expenses, toll fees, parking fees, business license fees, special clothing (it has the name of the business permanently written on the clothes), etc. Any legitimate business is required to keep records of all expenses taken, and you are not exempt from that. If you are audited and do not have any substantiation for the deductions you took against your gig income, the IRS most likely will not allow any.
If you receive a large lump-sum cash payment of over $10,000, you are required to report that on form 8300. (You might want to print a couple and keep them handy, because part of filling them out is asking the person paying you for name, Social Security number, address, driver license number, etc.) By the way, if you are paid in crypto, the same reporting rules apply.
Make estimated tax payments on a quarterly basis. Your gig income is subject to self-employment tax of 15.3% as well as regular federal income taxes. I suggest you put aside at least 30% of your net income and pay it quarterly to the IRS, using form 1040-ES.
There you have it. Have fun doing your “gig.”
Have you heard? Proverbs 12:17 says, “Whoever speaks the truth gives honest evidence, but a false witness utters deceit.”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 775-882-4459. On the web at BullisAndCo.com. Also on Facebook.